Frequently Asked Questions.

EMI (Equated Monthly Installment) is calculated using the formula EMI = P × r × (1+r)^n / ((1+r)^n − 1), where P is the loan principal, r is the monthly interest rate (annual rate ÷ 12 ÷ 100), and n is the loan tenure in months. Each EMI is split into a principal component and an interest component, and this split changes every month as the outstanding balance falls.

Interest is charged on the outstanding loan balance, which is highest at the start of the loan. So early EMIs are interest-heavy and later EMIs are principal-heavy, even though the EMI amount itself stays the same throughout the tenure.

Prepayment means paying an extra amount toward your loan principal, over and above your regular EMI. Because interest is calculated on the outstanding balance, every rupee of prepayment reduces the principal on which future interest is charged — which lowers your total interest cost and can shorten your loan tenure.

Reducing the tenure (keeping the EMI the same) saves more total interest, because the loan closes faster and less interest accrues overall. Reducing the EMI (keeping the tenure the same) lowers your monthly outflow, which helps cash flow but saves less interest in total. Choose based on whether you need the money freed up now or want to minimize total cost.

For floating-rate home loans and personal loans taken by individual borrowers, RBI rules prohibit banks and NBFCs from charging prepayment or foreclosure penalties. Fixed-rate loans, and loans to non-individual borrowers, may still carry a prepayment charge — always check your loan agreement or ask your lender directly.

Prepayment itself does not hurt your credit score — paying down debt faster is generally viewed positively. Foreclosing a loan entirely can marginally affect your credit mix and average account age, but the impact is usually small and short-lived compared to the interest savings.

There's no fixed rule — even a small recurring prepayment (monthly or yearly) compounds into large interest savings over a long tenure, because it attacks the principal early when interest costs are highest. Use the calculator above to compare one-time, yearly, and monthly prepayment amounts against your own loan numbers.

The calculator uses the standard reducing-balance EMI formula used by virtually all Indian banks and NBFCs for home, personal, car, and education loans. Actual figures from your lender may differ slightly due to processing fees, rounding conventions, or day-count methods — treat this as a close estimate for planning, not a substitute for your official loan statement.