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Home Loan Prepayment Calculator
Home loan prepayment allows borrowers to repay a home loan through a lump sum payment at any point before the loan tenure comes to an end. As the name suggests, this is payable over and above the regular loan EMIs or equal monthly instalments. In a home loan prepayment, a borrower can either makes a substantial payment out of the principal liability or entirely foreclose the loan account through repayment of the outstanding loan before the loan tenure ends.
Many home loan borrowers opt for home loan prepayment since a longer repayment tenure usually increases the interest liability. With the part payment of a home loan, one can reduce the overall interest outgo. Borrowers who wish to opt for home loan prepayment must ensure to check on the prepayment charges applied by the bank before using this option. Some banks may charge prepayment penalties if the prepayment amount is beyond a certain limit.
To keep a track of the total prepayment made against the home loan, one can use an online home loan prepayment calculator. Here is everything one needs to know about this easy-to-use online tool.
How to use Fisdom’s home loan prepayment calculator?
Fisdom’s home loan prepayment calculator is a free-to-use online tool that can help home loan borrowers easily estimate the benefits of using the home loan prepayment option. This calculator requires a user to enter a few details, as mentioned below:
- the loan amount,
- interest rate,
- loan tenure,
- loan start date,
- prepayment frequency and start date
- prepayment amount
With this information, the calculator estimates the impact of prepayment on EMI for the remaining tenure. This can help the borrower to know the extent to which prepayment can help minimise the overall liability burden.
This home loan prepayment calculator can be used by borrowers to estimate some important aspects of a home loan prepayment. Some of them are:
- revised EMI
- total EMI savings
- reduction in loan tenure
- savings in interest
Home loan borrowers can make the most of this calculator to easily determine whether home loan prepayment will be beneficial or not before choosing the prepayment option.
How does Fisdom’s home loan prepayment calculator work?
Fisdom’s home loan prepayment calculator uses the loan-specific details entered by the user to calculate the impact of home loan prepayment on outstanding liability. Here is how the calculator works:
- A user must first enter the home loan amount borrowed.
- The interest rate section must have the rate applicable on the home loan as per the loan agreement
- Loan tenure is the time within which the borrower has to make the entire loan repayment
- The repayment amount is the amount that one can pay toward the outstanding home loan
Once all the details are provided, the calculator will estimate:
- EMI savings: This is the amount that one can save towards EMI after making a prepayment
- Tenure reduction: This is the reduction in overall loan tenure after prepayment
Let’s understand the functionality of this calculator with an example.
Suppose a home loan borrower’s outstanding loan amount is Rs. 20 lakhs
The remaining loan tenure is 240 months
The interest rate is 8%
He/she decides to make a prepayment of Rs. 2 lakhs towards the outstanding loan
Once a prepayment is made, the tenure of the loan comes down. Instead, borrower could also decide to lower the EMI amount instead of the tenure.
What are the benefits of using home loan prepayment calculator?
Fisdom’s home loan prepayment calculator can offer the following benefits:
- By making a part prepayment of a home loan, borrowers can lower the principal outstanding significantly. With a lower principal amount, the interest liabilities also come down apart from EMI reduction. Calculating the benefits of prepayment manually can be time-consuming. However, with Fisdom prepayment calculator, this task can be made quick and easy.
- The home loan prepayment calculator from Fisdom enables borrowers to gauge the profitability of such prepayment. Since the calculator is free-to-use, users can modify the amount multiple times and arrive at the most profitable alternative within minutes.
- Borrowers can determine the total savings through interest reduction on the balance principal amount and EMI reduction.
Manual calculation of any changes in home loan EMI amount can be time-consuming, complex, and prone to errors. Fisdom’s online home loan prepayment calculator simplifies this task of computation while allowing users to access it at any time.
Some of the common benefits of home loan prepayment include reduced loan tenure, reduced net outstanding, reduced EMIs, and reduced overall interest burden on the loan. It can also help borrowers fetch a good credit score in the long run.
Depending on the lender and the home loan terms, a prepayment may attract penalty. While most lenders allow prepayment, some discourage it and therefore levy penalties.
The frequency with which you can make home loan prepayment depends on the lender and lending terms that have been agreed upon while taking the home loan.
Closing a home loan before the end of the loan tenure can be beneficial as it helps in reducing interest burden, reduced EMIs, and loan tenure.
Home loan prepayment is not allowed in case the home loan is based on a floating interest rate. As per RBI norms, floating interest rates can cause a significant burden on borrowers and prepayment can help in reducing this burden.