How Much Do You Save Prepaying ₹1 Lakh Every Year?

The table below shows how much interest you save by prepaying ₹1 lakh every year (approximately ₹8,333/month) across three common loan sizes, calculated using full amortisation simulation.

₹1 lakh per year, or about ₹8,333/month, is within reach for most salaried homeowners, especially when funded from annual bonuses, increments, or tax refunds.

Unlike a large lump sum which requires significant accumulated savings, a ₹1 lakh annual prepayment can often be planned alongside regular household finances.

The compounding effect of reducing principal early means a relatively modest annual payment creates outsized savings over the life of the loan. Small consistent prepayments beat large infrequent ones precisely because interest is calculated on the outstanding balance every single day.

Apply prepayments as early in the year as possible, ideally in April at the start of the financial year or immediately when funds are available (bonus payout, tax refund).

Every month you wait before applying a prepayment means interest continues accruing on the full outstanding balance. Applying the same ₹1 lakh in April vs October saves measurably more.

What if I can only prepay ₹50,000 per year instead of ₹1 lakh?

Even half the amount delivers meaningful savings. For a ₹50L loan at 8.5% / 20 years, ₹50,000/year saves approximately ₹10–11L and closes the loan roughly 3–4 years early. Any prepayment is better than none.

Should I use my annual bonus for prepayment?

Annual bonuses are excellent for prepayment because they are surplus income that will not affect your monthly cash flow. Applying the bonus directly to principal as soon as it is received maximises the interest saving.

This content is for educational purposes only and does not constitute financial advice. Consult a qualified advisor before making financial decisions.

The numbers above are for typical scenarios. Upload your statement to see exactly what ₹1 lakh per year saves on your specific loan.