Prepayment Savings Calculator
See how extra payments can save you thousands in interest and cut years off your loan.
Loan Details
Extra Payment Plan
Without Prepayment
With Prepayment
Compare Strategies (same $200 amount)
| Strategy | Interest Saved | Time Saved |
|---|---|---|
| Monthly(selected) | $108,197 | 6.8 years |
| Yearly | $13,208 | 0.8 years |
| Lump Sum | $1,314 | 0.0 years |
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The Power of Prepayment
Every extra dollar you pay goes directly to principal—and that saves you interest not just once, but for every remaining month of your loan. Even small extra payments compound into massive savings over time.
Our calculator shows you exactly how much you'll save with monthly, yearly, or one-time extra payments. Compare strategies and see your ROI on prepayment—often better than many investments!
How Prepayment Works
Compound Savings
An extra payment today reduces your principal. Lower principal means less interest next month, and every month after. Savings multiply over time.
Earlier Freedom
Prepayments don't just save money—they get you debt-free faster. One extra payment per year can cut 4-5 years off a 30-year mortgage.
ROI Calculation
Our calculator shows your return on prepayment. If you pay $20K extra and save $50K in interest, that's 150% ROI—tax-free and guaranteed.
Strategy Comparison
Compare monthly vs yearly vs lump sum with the same total amount. Monthly wins for savings, but yearly works great for bonus payments.
All Features
Frequently Asked Questions
How does loan prepayment save money?
Extra payments go directly to principal, reducing the balance on which interest is calculated. Less principal = less interest = faster payoff. A $200/month extra payment on a $300K mortgage at 7% can save $80,000+ in interest and pay off 7+ years early.
What is ROI on prepayment?
ROI (Return on Investment) on prepayment measures how much interest you save per dollar prepaid. If you pay $20,000 extra over time and save $50,000 in interest, your ROI is 150%. This is often better than many investment returns, especially tax-free.
Monthly vs yearly prepayment - which is better?
Monthly prepayment saves more because it reduces principal earlier. $200/month extra beats $2,400/year at year-end because the monthly approach reduces your balance (and interest) throughout the year. The difference can be thousands over the loan term.
Should I prepay or invest the extra money?
Compare your loan rate to investment returns. If your mortgage is 7% and investments might return 8%, investing seems better—but prepayment savings are guaranteed and tax-free. For peace of mind and debt freedom, prepaying is often the better choice.
Is there a prepayment penalty?
Check your loan agreement. Many modern mortgages have no prepayment penalty, but some loans (especially older ones or certain types) may charge a fee. In the US, prepayment penalties are rare for primary residence mortgages since 2014.
When is the best time to make extra payments?
Earlier is always better. Extra payments in year 1 save more than the same payment in year 10 because they reduce principal when the balance (and interest charges) is highest. Start prepaying as soon as possible.
Should I reduce EMI or reduce tenure?
Always choose to reduce tenure if you can afford the current EMI. Reducing tenure maximizes interest savings. Reducing EMI gives short-term cash flow relief but saves much less interest overall.
How much should I prepay?
Any amount helps! Even 10% of your EMI as extra payment makes a difference. Use our calculator to see the impact. A good target is to make one extra monthly payment per year—this alone can cut 4-5 years off a 30-year mortgage.
Should I save for emergency fund first or prepay?
Emergency fund first! Have 3-6 months of expenses saved before aggressive prepayment. Otherwise, you might need to borrow again at higher rates. Once your emergency fund is solid, direct extra money to prepayment.
What's the impact of a one-time bonus prepayment?
A lump sum prepayment can have dramatic effects. A $10,000 bonus paid toward a $300K mortgage at 7% could save $20,000+ in interest and cut months off your term. Use 'Lump Sum' mode in our calculator to see exact savings.