Home Loan Prepayment vs Invest Calculator

What your result means

The verdict line tells you which option leaves you with more money on the original loan-end date. The two bars show the two amounts: the prepay option (the EMIs you stop paying once the shortened loan ends, invested until the original end date) and the invest option (the lump sum compounding for the whole period while the loan runs as before). Below them, interest saved and months saved describe the prepayment itself, and gain from investing describes the alternative.

Because both options finish with the loan closed on the same date, the comparison is like-for-like. The result changes with one number above all: whether your expected return is above or below the loan rate.

How to use this prepay vs invest calculator

1. Enter the outstanding loan, its interest rate and the remaining tenure in months (from your latest statement).
2. Enter the lump sum you have in hand (bonus, maturity, savings).
3. Enter the return you expect if you invested it instead, after costs. Be conservative.
4. Read the verdict and the two bars. Move the return slider to see where the answer flips.

How the comparison works, with a worked example

Prepay:  balance − lump sum, same EMI → loan ends after m′ months (m′ < n)
         value = Σ EMI × (1 + i)^(months left until original end)   over the saved months
Invest:  value = lump sum × (1 + i)^n
i = expected return ÷ 12 ÷ 100,  n = original remaining months

Worked example (computed by this tool’s own function): ₹30,00,000 outstanding at 9% with 180 months left; lump sum ₹5,00,000; expected return 10%.

• EMI stays ₹30,428.00; after prepaying, the loan ends in 129 months, 51 months early
• Interest saved: ₹24,77,040 − ₹13,99,844 = ₹10,77,196
• Prepay option, freed EMIs invested at 10% until month 180: ₹19,39,931
• Invest option, ₹5,00,000 at 10% for 180 months: ₹22,26,960 (gain ₹17,26,960)
• Difference: ₹2,87,029 in favour of investing

Assumptions used by this calculator

How the answer changes with the expected return (₹30L, 9%, 180 months, ₹5L lump sum)

At a return equal to the loan rate (9%) the two options are almost identical; the gap grows in either direction from there.

Special cases and common mistakes

• Guaranteed vs expected. Interest saved by prepaying is certain; investment returns are not. Many people prepay part and invest part for that reason.
• Emergency fund first. Do not prepay money you may need within a year; a prepaid loan cannot be withdrawn again.
• Tax effects, in general terms. Deductions on home-loan interest reduce the effective loan rate, and taxes on investment gains reduce the effective return. If both apply to you, the comparison tilts a little towards investing; use an after-tax return to see it.
• Early vs late in the loan. Prepaying early in the tenure saves far more interest than the same amount late, because early EMIs are mostly interest.
• Reducing the EMI instead. If you ask the bank to lower the EMI and keep the tenure, the interest saved is smaller than shown here.
• Rate resets. For floating loans, the comparison is only as good as the rate assumption; re-run it when the rate changes.