Loan calculator
Prepayment calculator: reduce tenure or reduce EMI?
A part-payment goes straight to principal. What it saves depends on what you do next: keep paying the same EMI so the loan ends sooner, or keep the end date and pay a smaller EMI. This calculator runs both side by side, for a one-time payment, a regular one, or both.
Calculator
Comparison
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| Plan | EMI | Loan closes after | Total interest | Interest saved | Part-payments |
|---|
Balance left at the end of each loan year
| Loan year | No part-payment | Reduce tenure | Reduce EMI |
|---|
How the two choices work
Both plans start the same way: the part-payment is taken off the outstanding principal straight after the EMI you choose, so the next month's interest is charged on a smaller balance.
- Reduce tenure. Your EMI does not change. Because less of each EMI is now needed for interest, more of it repays principal, and the balance reaches zero months or years earlier. The calculator simply keeps running the schedule until the balance is cleared.
- Reduce EMI. The end date does not change. After each part-payment the EMI is recalculated with the usual EMI formula on the new balance over the instalments left.
With B the balance just after a part-payment, r the monthly rate (yearly rate ÷ 12 ÷ 100) and m the instalments left, the reduce-EMI plan's new instalment is:
new EMI = B × r × (1 + r)m ÷ [(1 + r)m − 1]
In the reduce-tenure plan the EMI stays fixed, and the number of instalments still needed is:
m = −log(1 − B × r ÷ EMI) ÷ log(1 + r)
rounded up to a whole month, with a smaller final instalment. The calculator gets the same answers by running the schedule month by month, which also handles several part-payments.
Reduce tenure usually saves more interest, because the extra principal repayment compounds through every remaining month. Reduce EMI frees up monthly cash flow instead. Which matters more to you is your call; the numbers just show the trade-off.
Worked example
A ₹25,00,000 loan at an example rate of 8.5% a year for 20 years has an EMI of ₹21,696 and total interest of ₹27,06,939. After the 12th EMI the balance is ₹24,50,244. A one-time part-payment of ₹2,00,000 is made then.
| Plan | EMI after part-payment | Loan closes after | Total interest | Interest saved |
|---|---|---|---|---|
| No part-payment | ₹21,696 | 20 years | ₹27,06,939 | – |
| Reduce tenure | ₹21,696 | 16 years 8 months | ₹20,38,603 | ₹6,68,337 |
| Reduce EMI | ₹19,925 | 20 years | ₹25,03,176 | ₹2,03,763 |
The reduce-EMI figure is the EMI formula applied to ₹22,50,244 at 8.5% over the remaining 228 months. In the reduce-tenure plan the same ₹21,696 EMI clears the loan 40 months early.
Rules worth checking before you prepay
- RBI's Pre-payment Charges on Loans Directions, 2025 say the lenders they cover shall not levy pre-payment charges on floating-rate loans to individuals for purposes other than business. They apply to loans sanctioned or renewed on or after 1 January 2026, with no minimum lock-in, and whether charges apply must be stated in the sanction letter, the loan agreement and the Key Facts Statement (Source: Reserve Bank of India, checked 26 October 2026). For older loans, fixed-rate loans and business loans, check your own agreement.
- For EMI-based floating-rate personal loans, RBI requires lenders to let borrowers prepay in part or in full at any point during the tenure, and at a rate reset to offer a higher EMI, a longer tenure or a combination (Source: Reserve Bank of India, checked 26 October 2026).
- Ask your lender how a part-payment will be applied (tenure or EMI) and get the revised schedule in writing.
Sources
- Reserve Bank of India (Pre-payment Charges on Loans) Directions, 2025, RBI/2025-26/64, 2 July 2025. Reserve Bank of India. Checked 26 October 2026.
- Reset of Floating Interest Rate on Equated Monthly Instalments (EMI) based Personal Loans, circular RBI/2023-24/55, 18 August 2023 (updated as on 1 October 2025). Reserve Bank of India. Checked 26 October 2026.
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