Two ways to use the savings
- Keep existing EMI — the EMI stays the same; the loan ends earlier. Recommended if your cash flow allows the same EMI: more of each future payment goes to principal, so you save the most interest.
- Keep existing tenure — the EMI drops; the loan ends on the original date. Useful if you want monthly relief instead of a faster payoff.
Formulas
EMI = P × r × (1+r)ⁿ / ((1+r)ⁿ − 1)
Where P = outstanding principal, r = monthly rate (annual ÷ 12 ÷ 100), n = tenure in months.
Keep EMI: new tenure n′ = ln(EMI / (EMI − P′ · r)) / ln(1 + r), where P′ = P − part-payment.
Keep tenure: new EMI = P′ · r · (1+r)ⁿ / ((1+r)ⁿ − 1), with original n.
FAQ
Are there prepayment charges?
Floating-rate home loans in India have zero prepayment penalty as per RBI rules. Fixed-rate loans, personal loans, car loans and credit cards may charge 2–5% — confirm with your lender.
When does part-payment make sense?
Almost always for high-rate debt (personal loan, credit card). For home loans at 8–10% the answer depends on what return you'd earn elsewhere — if you can earn more than your loan rate post-tax in equity SIPs, investing might beat prepayment.