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Home Loan Prepayment Calculator — How ₹5,000 Extra Per Month Saves ₹13.6L in Interest
Most home loan borrowers never touch their EMI after the loan is sanctioned — and that habit alone costs them lakhs in interest they didn't need to pay. The fix is simple: pay a fixed extra amount every month. On a typical ₹40 lakh loan at 8.75% over 20 years, even ₹5,000 extra a month makes a bigger difference than most people expect.
The Baseline
Without any prepayment, a ₹40,00,000 loan at 8.75% over 20 years carries a regular EMI of ₹35,348/month. Over the full tenure, you'd pay roughly ₹44.84 lakh in interest alone — almost as much as you originally borrowed.
What Extra Payments Actually Save
Every rupee you pay above the EMI goes straight to your outstanding principal, which shrinks the balance that future interest gets calculated on. Simulating this month by month (not a rough estimate — the actual reducing-balance math) gives:
- +₹1,000/month: saves ₹3.70L, closes about 1 year 4 months early
- +₹2,000/month: saves ₹6.78L, closes about 2 years 7 months early
- +₹5,000/month: saves ₹13.57L, closes about 5 years 3 months early
- +₹10,000/month: saves ₹20.51L, closes about 8 years 2 months early
Notice the relationship isn't a straight line — doubling the extra payment from ₹5,000 to ₹10,000 doesn't just double the savings, it does considerably more, because the loan also closes years sooner, cutting off that much extra interest entirely.
Why This Works
Every EMI splits into two parts: interest (calculated on your current balance) and principal. Early in the loan, interest dominates because your outstanding balance is still close to the full amount you borrowed. Any extra payment reduces that balance immediately, which lowers the interest charged in every month that follows — for the rest of the loan. That's why prepaying early has a much bigger effect than prepaying the same amount in year 15, when most of the balance is already gone.
The Best Time to Start
As early as possible. Because interest is front-loaded in every loan schedule, the same ₹5,000/month prepayment started in year 1 saves considerably more than starting it in year 10. If you've just taken a home loan, this is one of the highest-leverage financial habits you can build — even a modest amount, started early and kept consistent, beats a bigger amount started late.
No Penalty for Doing This
Since 2014, RBI rules prohibit banks and housing finance companies from charging any foreclosure or prepayment penalty on floating-rate home loans taken by individuals — whether it's a small partial prepayment or paying off the whole loan early. That makes prepayment essentially a risk-free, guaranteed return equal to your loan's interest rate, with none of the uncertainty of market investments. (If you're on a fixed-rate loan, check your agreement — some fixed-rate products still carry a charge.)
Should You Reduce EMI or Tenure?
If your goal is maximum savings, always choose to keep your EMI the same and let the loan close early, rather than reducing the EMI while keeping the original tenure. Cutting years off the end of the loan removes that much interest entirely — reducing the EMI instead just spreads the same balance over the same number of months at a slightly lower monthly cost, which saves far less overall.
Frequently Asked Questions
Calculate It Yourself
Enter your own loan amount, rate, and extra payment to see your exact numbers.
Prepayment Savings Calculator
See exactly how much you save by paying a little extra every month.
Interest Saved
₹13.57 L
Loan Closes Early By
5y 3m
Frequently Asked Questions
Where do these exact numbers come from?
They're computed using the reducing-balance EMI formula on a ₹40,00,000 loan at 8.75% over 20 years (240 months) — the same method every bank uses. Each extra-payment scenario was simulated month by month until the loan balance reached zero, so these are precise outputs, not rough estimates.
Is there a penalty for prepaying a home loan?
No. RBI's 2014 directive bans banks and housing finance companies from charging any foreclosure or prepayment penalty on floating-rate home loans taken by individuals. Fixed-rate loans may still carry a charge, so check your agreement if you're on one.
Should I reduce my EMI or my tenure when I prepay?
Reduce tenure if your goal is maximum savings. Keeping the EMI the same and letting the loan close early saves far more interest than reducing the EMI while keeping the original tenure, because you cut off years of future interest entirely.
Does the extra amount need to be exactly the same every month?
No — consistency matters more than precision. A slightly different amount most months, or an annual lump sum instead of a monthly habit, produces very similar total savings for the same total amount prepaid over the loan's life.
Why does doubling the extra payment more than double the savings?
Because the loan also closes years sooner. Going from ₹5,000 to ₹10,000 extra a month roughly 1.5×s the savings for 2× the payment — not because the effect weakens, but because the shorter payoff time cuts off that much more future interest.
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