Prepayment & Foreclosure Simulator
See how prepayments and foreclosure reduce your loan tenure and interest.
Fill inputs and click Calculate
- Prepayment starts after the specified month.
- No foreclosure charges assumed (RBI bars banks from charging).
- Monthly prepayment is added to principal each month.
Frequently Asked Questions
How much interest do I save by making a prepayment on my home loan?
The interest saved depends on the prepayment amount, when you make it, and your remaining tenure. As a general rule, a lump-sum prepayment made in the early years of the loan saves the most interest because it reduces the principal for the longest period. For example, a ₹5 lakh prepayment in year 3 of a 20-year ₹50 lakh loan at 8.5% can save approximately ₹11-12 lakh in total interest.
Are prepayment charges applicable on home loans in India?
As per RBI guidelines, banks and NBFCs cannot charge prepayment or foreclosure fees on floating-rate home loans to individual borrowers. However, fixed-rate home loans may attract prepayment charges of 2-4% depending on the lender. Always check your loan agreement for specific terms before making a prepayment.
Should I prepay my home loan or invest the money elsewhere?
Compare your home loan interest rate with the post-tax return you can earn on investments. If your loan rate is 8.5% and you can earn 12%+ from equity investments (post-tax), investing may be better. However, if your risk appetite is low, prepaying a loan at 8.5% is equivalent to earning a guaranteed 8.5% return - which is attractive. Consider your emergency fund, other goals, and risk tolerance.
What is the difference between part-prepayment and foreclosure?
Part-prepayment means paying a lump sum towards your loan principal while continuing regular EMIs - this reduces either your EMI or your remaining tenure. Foreclosure means paying off the entire outstanding loan in one go, closing the loan account completely. Foreclosure saves the most interest but requires a large lump sum.
How does prepayment affect my loan tenure vs my EMI?
When you make a prepayment, you can choose to either reduce your EMI (keeping tenure the same) or reduce your tenure (keeping EMI the same). Reducing the tenure saves more interest over the loan life. For example, a ₹5 lakh prepayment might reduce your EMI by ₹5,000, or it might reduce your tenure by 3-4 years - the latter saves lakhs more in interest.
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