After a part payment, lower EMI or shorter tenure?
By Vijay Singh Sinhmar · Fintech automation specialist, 8 years in finance · Published 2026-10-09
Keeping the EMI and shortening the loan saves far more interest; lowering the EMI gives monthly room instead. On ₹30,00,000 at an example 8.5% with 20 years left, a ₹2,00,000 part payment with the EMI kept at ₹26,035 ends the loan 36 months sooner and saves ₹7,56,579. Lowering the EMI to ₹24,299 saves ₹2,16,555.
Educational information, not investment advice · Muktify is not SEBI-registered
Home Loan Prepayment Calculator
A lump sum or a little extra each month — see the interest it saves, and whether to cut the EMI or the tenure.
Leave blank and it is worked out from the balance, rate and years left.
Paid on top of the EMI. It shortens the loan, so it counts in the first option only.
Interest saved by prepaying
₹7,56,579
EMI now
₹26,035
Interest left to pay
₹32.48L
Ends in
20 years
Ends in, after prepaying
17 years
Keep the EMI, shorten the loan
You go on paying the same EMI, so the loan ends sooner.
Interest saved
₹7,56,579
- Monthly payment
- ₹26,035
- Loan ends in
- 17 years
- Time saved
- 3 years
Keep the end date, lower the EMI
The loan runs for the same time, with a smaller EMI.
Interest saved
₹2,16,555
- New EMI
- ₹24,299
- EMI falls by
- ₹1,736
- Loan ends in
- 20 years
Estimates only. The prepayment is applied at the start, at a fixed rate. Your lender's figures may differ with the day it credits the payment and with any rate reset.
Educational estimates from your own inputs and assumptions — not investment advice. Muktify is not SEBI-registered.
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What the lender does after a part payment
A part payment goes straight to the principal. The lender then recasts the loan one of two ways: it keeps the EMI and shortens the number of months, or it keeps the end date and lowers the EMI. Many lenders apply the first unless you ask for the second, so it is worth saying which you want when you pay.
Both choices, worked
Take ₹30,00,000 outstanding at 8.5% with 240 months left, an EMI of ₹26,035 and ₹32,48,327 of interest still to come. Pay ₹2,00,000 and keep the EMI: the loan ends in 204 months instead of 240, and the interest falls by ₹7,56,579. Pay the same ₹2,00,000 and keep the 240 months: the EMI falls to ₹24,299 and the interest falls by ₹2,16,555.
A larger part payment widens the gap. ₹5,00,000 with the EMI kept ends the loan 78 months sooner and saves ₹15,43,415 of interest. Lowering the EMI instead brings it to ₹21,696 and saves ₹5,41,388.
| Part payment | Keep EMI: months saved | Keep EMI: interest saved | Lower EMI: new EMI | Lower EMI: interest saved |
|---|---|---|---|---|
| ₹2,00,000 | 36 | ₹7,56,579 | ₹24,299 | ₹2,16,555 |
| ₹5,00,000 | 78 | ₹15,43,415 | ₹21,696 | ₹5,41,388 |
Why one saves three times the other
Keeping the EMI means the money freed by the smaller balance keeps going to principal every month, so the balance falls faster and every later month carries less interest. Lowering the EMI hands that money back to you each month, and the balance falls on its original schedule from a lower start.
The lower EMI is ₹1,736 a month of room after a ₹2,00,000 payment. That room is worth something if money is tight or another loan costs more, and the larger saving is worth something if it is not. Which matters more depends on the rest of your month, which only you can see.
Frequently asked questions
Is there a charge for a part payment?
Not on a floating-rate home loan taken by an individual for a non-business purpose; RBI bars lenders from charging one. A fixed-rate loan may carry a charge set in the agreement.
Can I lower the EMI now and pay more later?
Yes. Paying more than the EMI each month, where the loan allows it, goes to principal and shortens the loan without changing the EMI on record.
Does a part payment early in the loan save more?
Yes. Early in a home loan most of each EMI is interest, so principal cleared then would otherwise have carried interest for many more months than the same amount cleared near the end.
Does a part payment reduce my tax deduction on home loan interest?
It reduces the interest you pay, so any deduction based on that interest falls with it. Under the new regime a self-occupied home’s interest carries no deduction, so nothing is lost there.
Related
- Home loan prepayment calculator →
- My home loan rate dropped: lower EMI or shorter tenure? →
- Can I close my home loan early, and is there a charge? →
- Should I prepay my home loan or invest? →
Last updated 2026-10-09. Figures reflect FY 2026-27 and are educational estimates, not advice. Muktify is not SEBI-registered and never recommends or ranks any instrument.
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