Loan Prepayment & Foreclosure Savings Calculator
Quantifies total interest savings and loan tenure reduction gained by making part-prepayments or recurring extra principal payments.
Loan tenure cut by: 32 Months (2.7 Years)
How This Calculation Formula is Formulated
Compares standard amortization interest against a truncated schedule resulting from lump-sum capital reduction directly retiring debt principal.
Variable Definitions & Measurement Units
₹30 Lakh Home Loan with ₹3 Lakh Part-Payment
A borrower with ₹30,00,000 balance at 8.5% interest and 15 years remaining makes a one-time ₹3,00,000 prepayment.
Tenure Reduction vs EMI Reduction
When making a loan part-prepayment, banks offer two choices: reduce the monthly EMI or reduce the remaining loan tenure. Choosing tenure reduction preserves the original EMI and maximizes compound interest savings.
Prepaying during the early third of a loan's tenure delivers exponential savings because the principal amortization component is small and front-loaded interest dominates early installments.
Frequently Asked Questions About Loan Prepayment & Foreclosure Savings Calculator
Are there prepayment penalty charges on home loans in India?
Under RBI guidelines, banks and housing finance companies cannot levy prepayment penalties on floating-rate home loans availed by individual borrowers.
Should I prepay home loan or invest in mutual funds?
Compare the home loan interest rate (e.g. 8.5% tax-deductible) against expected mutual fund returns (e.g. 12%). If investment returns comfortably exceed the borrowing rate, investing the surplus may generate superior terminal wealth.
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