₹

Prepay the loan, or invest the money?

Nobody can tell you what the market will return. What CAN be computed is the bar: the after-tax return your investment must beat for investing to have been the better call. This calculator computes that bar honestly — including the tax subtlety most get wrong.

Updated 21 July 2026 · Runs entirely in your browser — nothing you type is sent anywhere

Outstanding balance today (₹) Interest rate (% per year) Months left on the loan Lump sum you could pay now (₹) …or extra every month (₹) Is this a self-occupied home loan? Your slab (old regime only)

—

a year, after tax — the break-even return

Loan shortened by

—

Interest saved

—

Tax relief given up

—

Net saved by prepaying

—

Prepaying earns its return with certainty; an investment does not. That asymmetry is not in the number — weigh it yourself, and keep an emergency fund before locking money into a loan.

This calculator needs JavaScript. The method: both futures are simulated month by month with identical cash outflows, and the break-even is the investment return at which they end with equal wealth.

The rule of thumb — and exactly when it breaks

The advice you'll hear everywhere: "prepay if your loan rate beats the return you'd earn investing — and if it's a home loan on the old regime, discount the rate by your tax slab first." So a 9% home loan for someone in the 30% bracket "really" costs 6.3%, and any investment expected to beat 6.3% should win.

That discount is correct only while your Section 24b interest deduction stays under the ₹2,00,000 cap for a self-occupied house. A ₹30–50 lakh loan at today's rates pays ₹2.7–4.4 lakh of interest a year — far past the cap. Prepay such a loan and you still claim the full ₹2,00,000 afterwards; the interest you saved was earning you no tax relief at all. The discount shouldn't be applied, and the honest bar sits near the full loan rate.

How big is the error? On a ₹50L loan at 9% in the 30% bracket, the shortcut says beat 6.3% and invest. The month-by-month simulation says the real break-even is about 8.2% — nearly two percentage points higher, and easily the difference between investing and prepaying being the right call. This calculator simulates both futures and lets the cap bind where it actually binds, which is why its answer moves with your loan size while the shortcut's doesn't.

Prepayment charges: mostly a thing of the past

The RBI's Pre-payment Charges on Loans Directions, 2025 bar charges on floating-rate loans to individuals for non-business purposes — home, education and personal loans alike — with no lock-in and regardless of where the money comes from, for loans sanctioned or renewed on or after 1 January 2026. Fixed-rate loans and older agreements can still carry a charge, so check your sanction letter — and if a charge is levied on a loan that qualifies, ask for it back. (Directions text)

What the number can't tell you

The break-even treats a market return and a loan's interest saving as interchangeable. They aren't: the loan saving is guaranteed, the market return is not. A 12% expected equity return that beats an 8.2% bar on paper still arrives with years where it's −15%. If the loan keeping you up at night is worth more to you than the spread, that's not irrational — it's a preference the arithmetic can't price. The number tells you where the line is; which side of it you want to live on is yours.

Do this with your real loan — free, private, on your device →

The Unowe planner reads your actual loan schedule and tax regime, so the break-even uses your real §24b headroom instead of a guess — and your data never leaves the device.

Educational tool, not investment advice; we are not SEBI-registered advisers. Verify prepayment terms in your sanction letter. Privacy & Terms