Loans and Credit CardsSample article
How your loan EMI is calculated
The formula behind every home, car and personal loan instalment, with a worked example and what it means for prepayment.
3 min read
Loan prepayment calculator
How much interest a one-time part payment saves, and whether to use it to shorten the loan or lower the EMI.
Result
Interest saved
₹8,41,860
- Loan ends
- 4 years 4 months sooner
- New tenure
- 15 years 8 months
- EMI
- ₹21,695.58
- unchanged
With and without the prepayment
| Item | Without | With |
|---|---|---|
| EMI | ₹21,695.58 | ₹21,695.58 |
| Tenure | 20 years | 15 years 8 months |
| Total interest | ₹27,06,940 | ₹18,65,080 |
| Prepayment | — | ₹3,00,000 |
Yearly summary with the prepaymentShow 16 rowsHide
| Year | Principal paid | Interest paid | Balance at year end |
|---|---|---|---|
| 1 | ₹49,756 | ₹2,10,591 | ₹24,50,244 |
| 2 | ₹54,154 | ₹2,06,193 | ₹20,96,091 |
| 3 | ₹85,458 | ₹1,74,889 | ₹20,10,633 |
| 4 | ₹93,011 | ₹1,67,336 | ₹19,17,622 |
| 5 | ₹1,01,233 | ₹1,59,114 | ₹18,16,389 |
| 6 | ₹1,10,181 | ₹1,50,166 | ₹17,06,208 |
| 7 | ₹1,19,920 | ₹1,40,427 | ₹15,86,289 |
| 8 | ₹1,30,520 | ₹1,29,827 | ₹14,55,769 |
| 9 | ₹1,42,056 | ₹1,18,291 | ₹13,13,713 |
| 10 | ₹1,54,613 | ₹1,05,734 | ₹11,59,100 |
| 11 | ₹1,68,279 | ₹92,068 | ₹9,90,821 |
| 12 | ₹1,83,153 | ₹77,194 | ₹8,07,668 |
| 13 | ₹1,99,343 | ₹61,004 | ₹6,08,325 |
| 14 | ₹2,16,963 | ₹43,384 | ₹3,91,363 |
| 15 | ₹2,36,140 | ₹24,207 | ₹1,55,222 |
| 16 | ₹1,55,222 | ₹4,653 | ₹0 |
How this is calculated
Balance after k EMIs, then − prepayment
- Keep the EMI: the same EMI runs until the smaller balance is repaid
- Lower the EMI: EMI = new balance × r × (1 + r)ᵐ ÷ ((1 + r)ᵐ − 1), m = EMIs left
Assumptions and limits
- Interest is charged monthly on the outstanding balance (monthly reducing balance), as Indian banks do for home, car and personal loans.
- The rate stays the same for the whole loan. Floating rates change with the bank's benchmark, which changes the EMI or the tenure.
- Processing fees, insurance and other charges are not included.
- Interest is rounded to the paisa each month; the last EMI absorbs the rounding so the loan closes at exactly ₹0.
- The prepayment is made right after the EMI you choose. No prepayment charge is deducted. Under RBI rules banks can't charge one on floating-rate loans taken by individuals for non-business use; fixed-rate loans may carry a charge, so check your loan agreement.
This calculator gives an educational estimate from the values you enter. It isn't personalised financial, tax or investment advice. Rates, rules and your own situation can change the result. Read the disclaimer