1. What is Home Loan Prepayment?

Home loan prepayment refers to paying off part of your principal loan amount before the scheduled due date. This reduces your outstanding principal, which can lead to either reduced EMIs or shortened loan tenure.

2. How Does Prepayment Affect EMI?

The calculator uses the standard EMI formula adjusted for reduced principal:

Where:

• \( P \) — Original principal amount
• \( prepayment \) — Additional payment made
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Total number of monthly payments

Explanation: By reducing the principal amount, the monthly EMI can be recalculated at the same interest rate and tenure, resulting in lower payments.

3. Benefits of Prepayment

Details: Prepayment helps save on total interest paid over the loan tenure, reduces financial burden through lower EMIs, and helps become debt-free faster.

4. Using the Calculator

Tips: Enter loan amount in USD, annual interest rate in percentage, loan term in years, and prepayment amount. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Should I reduce EMI or loan tenure when prepaying?
A: Reducing tenure saves more interest overall, while reducing EMI improves monthly cash flow. Choose based on your financial priorities.

Q2: Are there prepayment penalties?
A: Some lenders charge prepayment penalties, especially in fixed-rate loans. Check your loan agreement before prepaying.

Q3: How often can I make prepayments?
A: This depends on your loan terms. Some allow unlimited prepayments, while others may have restrictions.

Q4: Is prepayment better than investing?
A: Compare your loan interest rate with potential investment returns. If loan rate is higher, prepayment usually makes more sense.

Q5: Does prepayment affect credit score?
A: Prepayment doesn't directly hurt your credit score and may improve it by reducing your debt-to-income ratio.