EMI stands for Equated Monthly Instalment — the fixed amount you pay every month for a loan. It includes both the principal repayment and the interest component. Early in the loan, most of your EMI goes toward interest; as the loan matures, more goes toward principal.

How much does a prepayment of ₹5 lakh save on a home loan?

It depends on when in the loan tenure you make the prepayment. On a ₹50 lakh loan at 8.5% for 20 years, a prepayment of ₹5 lakh in year 5 typically saves ₹8–12 lakh in total interest and reduces tenure by 2–3 years. The earlier in the tenure you prepay, the larger the savings — because interest is charged on the outstanding principal.

Should I reduce EMI or reduce tenure when making a prepayment?

Reducing tenure saves more money — you pay off the loan faster and accumulate less interest. Reducing EMI keeps the same tenure but lowers your monthly payment, which helps if your cash flow is tight. If you can afford the current EMI, choose 'Reduce Tenure' for maximum savings.

How to Calculate EMI & Prepayment Savings

EMICalc has 5 calculators. This guide shows exactly how to use each one, with filled examples so you know what to expect.

🏠 EMI Calculator 💰 Prepayment 📊 Compare Loans 💡 Affordability 🧾 Tax Benefit

Calculator 1

Home Loan EMI Calculator

Open the main EMICalc page. Enter these three values:

Example — typical home loan in Bengaluru

• Loan Amount: ₹60,00,000 (60 lakhs)

• Annual Interest Rate: 8.75%

• Tenure: 20 years

Monthly EMI₹52,859

Total Payment (20 years)₹1,26,86,160

Total Interest Paid₹66,86,160

Interest-to-Principal RatioYou pay ₹1.11 interest for every ₹1 borrowed

💡 The chart below the result shows how your EMI splits between principal and interest each year. In year 1, about 78% of each EMI is interest. By year 15, that flips — 68% goes to principal.

Calculator 2

Prepayment Calculator

Use this after you've taken a loan and want to see how a lump-sum payment affects your loan. Go to Prepayment from the nav.

Example — 5 years into a 20-year loan, making a prepayment

• Outstanding Principal (after 5 years): ₹54,20,000

• Current Interest Rate: 8.75%

• Remaining Tenure: 15 years

• Prepayment Amount: ₹5,00,000

• Preference: Reduce Tenure

Result

• New tenure after prepayment: 12 years 4 months (saves 2 years 8 months)

• Interest saved: ₹9,43,211

• EMI stays the same: ₹52,859/month

💡 Reduce Tenure vs Reduce EMI: Reducing tenure (same EMI, shorter loan) almost always saves more money than reducing EMI (same tenure, lower monthly payment). Choose "Reduce EMI" only if your monthly cash flow is tight.

Calculator 3

Compare Loans from Two Banks

Go to Compare. Enter loan details for two different banks side by side.

Example — SBI vs HDFC for ₹50 lakh home loan

Bank A: SBI

Amount: ₹50,00,000

Rate: 8.50%

Tenure: 20 years

Bank B: HDFC

Amount: ₹50,00,000

Rate: 8.75%

Tenure: 20 years

SBI monthly EMI: ₹43,391 · Total interest: ₹54,13,800

HDFC monthly EMI: ₹44,082 · Total interest: ₹55,79,680

SBI saves ₹1,65,880 over 20 years — just from 0.25% lower rate

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Frequently Asked Questions

What is EMI?

EMI (Equated Monthly Instalment) is the fixed monthly payment for a loan. It includes principal repayment and interest. EMI = [P × R × (1+R)^N] / [(1+R)^N – 1], where P = principal, R = monthly interest rate, N = tenure in months.

When is the best time to make a prepayment?

As early as possible. In the first few years of a loan, almost all of your EMI goes toward interest. A prepayment at year 3 saves much more than the same prepayment at year 15. Banks typically allow one free prepayment per year on floating rate loans.

Does reducing tenure vs reducing EMI matter for tax benefits?

Your Section 80C deduction (up to ₹1.5L on principal) and Section 24B deduction (up to ₹2L on interest) both remain the same regardless of whether you reduce tenure or EMI. The tax benefit calculation depends on what you actually pay that year — the Tax Benefit tab in EMICalc shows the breakdown.

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