Prepay or Invest Calculator

How to use this calculator

1. Pick a question: Prepay or invest?, Buy now or save first?or True cost of an EMI.
2. Enter the loan — for prepaying, what you still owe and the years left — and your spare money: a lump sum now, an amount each month, or both.
3. Choose where the money would be invested — a mutual fund SIP, RD, FD, PPF, Sukanya Samriddhi or NSC — and its return. Government scheme rates are filled in for Oct–Dec 2026 automatically.
4. Switch to After tax to add your regime and slab. The Compare chart shows both choices year by year.

Prepay or invest: how it is worked out

Enter what you still owe and the time left on the loan — or choose Work it out for me and give the original loan, rate, tenure and the month of the first EMI. Then enter the spare money: a lump sum available today, an amount every month, or both. The comparison runs until the loan would end, and both choices use exactly the same money. One rule applies to both: whatever the loan does not take is invested.

• If you prepay: the lump sum comes off the loan today and the monthly amount is prepaid every month. If the loan then finishes sooner, the whole EMI plus the spare money is invested every month after it closes. If you lower the EMI instead, the drop in EMI is invested every month.
• If you invest: the loan runs as it is; the lump sum is invested today and the monthly amount every month, until the loan would end.

Whichever ends with more is ahead. The break-even return is the return at which both end level — before tax, that is your loan rate.

Example: ₹50,00,000 owed at 8.5% for 20 more years (EMI ₹43,391), with the ₹5,00,000 now and ₹10,000 a month to spare. Prepaying clears the loan in 10 years 9 months and saves ₹30,39,154 in interest; then ₹53,391 a month is invested, ending at ₹1,08,11,033. Investing the spare money in a mutual fund SIP at 12% instead ends at ₹1,53,38,830. The break-even return is 8.5%.

Buy now or save first: how it is worked out

Buy now: you pay the down payment and take a loan for the rest. Your monthly budget is the EMI.

Save first: the down payment becomes your starting savings, and each month you invest the same budget less any rent you pay meanwhile. Rent and the price both rise each year at the price-rise rate. As soon as your savings (after tax, when tax is on) cover the price at that time, you buy with cash; from then on the whole budget is invested.

By the end of the loan tenure both of you own the same thing; the difference is what is left in savings, and how long you waited.

Investments and tax: the rules used

• Mutual fund SIP: compounded monthly, paid at the start of each month (as in our SIP calculator).
• RD and FD: compounded quarterly; for FDs, each month's money goes into a new deposit, renewed at the same rate. Default FD rate: the Post Office 5-year Time Deposit (7.5%).
• PPF and Sukanya Samriddhi: interest each month on the balance, added at the end of each year, up to ₹1,50,000 a year. Sukanya takes deposits for 15 years and matures after 21. Money above the limit goes into fixed deposits at the rate you set. PPF money stays locked until the account matures.
• NSC: compounded yearly; a new 5-year certificate each month, reinvested on maturity.

With After tax on (Income-tax Act, 2025):

• Home-loan interest on a home you live in is deducted up to ₹2,00,000 a year in the old regime (Section 22); the new regime does not allow it (Section 202). Prepaying lowers the interest, so it also lowers this relief. The tax saved is invested.
• RD, FD and NSC interest is taxed at your slab every year as it builds up.
• Mutual fund gains are taxed as if you sold everything at the end: units held more than 12 months at 12.5% on gains above ₹1,25,000 (Section 198), others at 20% (Section 196). Selling over several years would use the ₹1,25,000 exemption more than once.
• PPF and Sukanya Samriddhi interest and payouts are tax-free in both regimes.
• The ₹1,50,000 Section 123 deduction (old regime) is assumed already used, e.g. by EPF. Cess and surcharge are left out.