Loan Refinancing Calculator India 2026

What is Loan Refinancing and How Does Balance Transfer Work in India?

Loan refinancing — commonly called loan balance transfer in India — is the process of moving your outstanding loan from one lender to another that offers a lower interest rate, better tenure, or both. The new lender pays off your existing loan in full, and you begin repaying a fresh loan under the new terms. For example, if you took a home loan at 9.5% three years ago and SBI now offers 8.25%, refinancing could save you lakhs in total interest over the remaining tenure.

Our loan refinancing calculator helps you compare your current loan against prospective offers by factoring in processing fees, prepayment penalties, stamp duty, legal charges, and the break-even period — so you know exactly when refinancing starts saving you money.

How to Calculate the Break-Even Period for Loan Refinancing?

The break-even period is the number of months it takes for your cumulative monthly savings to cover the total cost of refinancing. The formula is: Break-Even Months = Total Refinancing Cost / Monthly EMI Savings. Only after this period does refinancing genuinely save you money.

Example: You have an outstanding home loan of ₹30,00,000 at 9.25% with 15 years remaining. A new lender offers 8.25%. Your current EMI is ₹30,830 and the new EMI would be ₹29,210 — a monthly saving of ₹1,620. If total refinancing costs (processing fee ₹15,000 + prepayment penalty ₹0 + legal ₹5,000) are ₹20,000, the break-even period is ₹20,000 / ₹1,620 ≈ 13 months. Since you have 15 years remaining, refinancing saves you approximately ₹2.72 lakh in net interest after costs.

Rule of thumb: Refinancing is worth it when the break-even period is less than one-third of your remaining tenure. If break-even is 13 months and you have 180 months left, it is a clear yes.

Should I Prepay My Home Loan or Refinance It?

This is the most common dilemma borrowers face. Prepayment means paying a lump sum towards your outstanding principal to reduce interest liability. Refinancing means switching lenders for a lower rate. The right choice depends on your situation:

• Choose prepayment when you have a lump sum available, your lender charges zero or low prepayment penalties (RBI mandates nil penalty on floating-rate home loans), and market rates have not dropped significantly since you took the loan.
• Choose refinancing when interest rates have fallen by 0.50% or more, you don't have a large lump sum but want lower EMIs every month, or you need to restructure tenure or take a top-up loan for renovation or another purpose.
• Combine both — refinance first to lock in a lower rate, then make periodic part-prepayments to reduce tenure further. This is often the optimal strategy for long-tenure home loans.

Use our Loan Prepayment Calculator alongside this refinancing calculator to compare both scenarios with your actual numbers.

What are Prepayment Penalties on Home Loans in India?

As per RBI guidelines, banks and housing finance companies cannot charge any prepayment penalty on floating-rate home loans. This applies to both partial prepayments and full foreclosure. However, fixed-rate home loans may attract a penalty of 2–3% on the outstanding principal amount.

For other loan types, penalties vary by lender:

• Personal loans: Typically 2–5% of outstanding principal. Some banks charge a flat fee of ₹2,000–₹5,000.
• Car loans: Usually 2–5% of outstanding. Many lenders waive penalties after 12 EMIs are paid.
• Business loans: 2–4% of outstanding. CGTMSE/MUDRA loans may have different terms.

Example: On a personal loan with ₹5,00,000 outstanding and a 3% penalty, the charge is ₹15,000. If refinancing saves ₹2,500/month, you recover the penalty in just 6 months. Our calculator factors in this penalty to show your true net savings.

What are the Hidden Charges in Loan Refinancing?

Beyond the headline interest rate, several costs can eat into your refinancing savings if you are not careful:

• Processing fee: 0.25%–1% of the new loan amount. For a ₹40 lakh loan, this is ₹10,000–₹40,000. Always negotiate — many lenders waive or reduce this during festive offers.
• Property valuation fee: ₹2,000–₹10,000 for secured loans. The new lender needs an independent valuation of your collateral.
• Legal and technical charges: ₹3,000–₹15,000 for document verification and title search by the new lender's legal team.
• Stamp duty on new loan agreement: Varies by state — 0.1% to 0.5% of loan amount. In Maharashtra it is 0.1%, in Karnataka 0.3%. Often overlooked but can be ₹5,000–₹20,000 on large loans.
• Insurance re-assignment: If you have loan protection insurance, the new lender may require a fresh policy or re-assignment, which could mean additional premium.
• CERSAI registration: ₹50–₹100 for registering the new charge with the Central Registry.

Tip: Ask the new lender for a complete fee schedule in writing before signing. Enter all costs into our refinancing calculator to see the true break-even period.

Tax Implications of Loan Refinancing Under Section 24 and Section 80C

Home loan interest deduction (Section 24b): You can claim up to ₹2,00,000 per year on interest paid for a self-occupied property. When you refinance, the interest paid to the new lender qualifies for this deduction — the tax benefit continues seamlessly. However, any processing fees or prepayment penalties paid are not deductible under Section 24.

Principal repayment (Section 80C): The principal component of your EMI continues to qualify for the ₹1,50,000 annual deduction under Section 80C after refinancing. Stamp duty and registration charges on the original property purchase (not the refinanced loan) are also eligible under Section 80C.

Important note: If you take a top-up along with refinancing, the top-up interest is deductible under Section 24 only if the top-up amount is used for acquisition or improvement of a house property. Using it for personal expenses means that portion of interest is not deductible. Consult a CA before claiming.

Who Should Refinance Their Loan — and Who Should Avoid It?

Refinancing is ideal for borrowers who:

• Have at least 5+ years of remaining tenure — the longer the remaining tenure, the greater the interest savings.
• Can get a rate reduction of 0.50% or more from a new lender.
• Have a CIBIL score of 750+, which qualifies them for the best rates.
• Are in the early years of the loan, where interest forms the bulk of EMI — refinancing here maximises savings.
• Need additional funds through a top-up loan at competitive rates.

Avoid refinancing when:

• Your remaining tenure is less than 3 years — the break-even period may exceed your loan term, making it a loss.
• The rate difference is below 0.25% — savings will be negligible after fees.
• You are on a fixed-rate loan with heavy prepayment penalties (2–3%) — the penalty alone may wipe out savings.
• Your credit score has dropped since the original loan — you may not qualify for a better rate.

Step-by-Step Process: How to Do a Loan Balance Transfer in India

1. Check your eligibility: Ensure your CIBIL score is 700+ and you have at least 12 EMIs paid without default on your current loan.
2. Compare offers: Collect rate quotes from 3–5 lenders. Enter each into the refinancing calculator to compare net savings after all fees.
3. Apply to the new lender: Submit your application with required documents. The new lender verifies your income, creditworthiness, and property (for secured loans).
4. Get a foreclosure letter: Request an NOC and outstanding balance statement from your current lender. Banks must provide this within 15 days as per RBI rules.
5. Loan sanction and disbursement: The new lender disburses the sanctioned amount directly to your old lender, closing the existing loan.
6. Document transfer: Your original property documents are transferred from the old lender to the new one. Ensure you get an acknowledgement receipt.
7. Start new EMI: Your new, lower EMI begins from the next billing cycle. Update auto-debit mandates accordingly.

The entire process typically takes 15–30 working days. During this transition, continue paying EMIs to your old lender until you receive written confirmation of loan closure.

Documents Required for Loan Refinancing in India

Keep these documents ready before applying for a loan balance transfer:

• Identity and address proof: Aadhaar, PAN card, passport, or voter ID
• Income proof: Last 3 months salary slips (salaried) or last 2 years ITR with computation (self-employed)
• Bank statements: Last 6 months showing EMI debits and salary credits
• Existing loan documents: Sanction letter, repayment schedule, latest statement of account, list of EMIs paid
• Property documents (for home loans): Sale deed, title deed, builder agreement, property tax receipts, approved building plan, occupancy certificate
• Foreclosure letter / NOC: Obtained from your current lender stating outstanding balance and no-dues status

Can You Refinance an Education Loan or Student Loan in India?

Yes, education loan refinancing is available in India, though fewer lenders offer it compared to home loan balance transfers. If you took an education loan at 10–12% for higher studies and your income has since stabilised, refinancing to a lender offering 8–9% can reduce your monthly EMI and total repayment significantly — especially for large loans taken for studying abroad.

Key points for education loan refinancing:

• Moratorium period: If you are still in the moratorium (repayment holiday) period, most lenders will not approve a balance transfer. Wait until regular EMI repayment begins and you have paid 6–12 EMIs on time.
• Collateral-based loans: Secured education loans (with property or FD collateral) are easier to refinance and attract lower rates (8–9%) compared to unsecured ones (10–13%).
• Section 80E tax benefit continues: Interest paid on the refinanced education loan still qualifies for full deduction under Section 80E — with no upper limit — for up to 8 years from the year you start repaying. This is one of the most generous tax deductions available.
• Prepayment penalty: Education loans from most public sector banks (SBI, Bank of Baroda, Canara Bank) carry zero prepayment penalty. Private lenders and NBFCs may charge 2–4%. Confirm before initiating a transfer.
• Co-borrower impact: Education loans typically have a parent or guardian as co-borrower. Refinancing requires the co-borrower's consent and documents as well.

Example: You have an education loan of ₹15,00,000 at 11% with 7 years remaining. A new lender offers 8.5%. Your current EMI is ₹25,460 and the new EMI would be ₹23,720 — saving ₹1,740/month. With processing fee of ₹7,500 and zero penalty, break-even is just 4–5 months. Over 7 years, you save approximately ₹1.39 lakh in interest. Use our Education Loan EMI Calculator to verify the numbers for your case.

Tips to Maximise Savings When Refinancing Your Loan

• Negotiate the processing fee: Many lenders waive it during festive campaigns (Oct–Jan) or for customers with high credit scores. Always ask — the worst they can say is no.
• Keep the same or shorter tenure: Refinancing at a lower rate with the same tenure maximises interest savings. Extending tenure reduces EMI but increases total interest paid.
• Time it to RBI rate cuts: After an RBI repo rate cut, banks lower their MCLR/EBLR rates. Wait 1–2 months for the new rates to reflect, then approach lenders.
• Bundle with a top-up only if needed: Top-ups add to your principal. Take one only if you have a genuine requirement like home renovation — not for discretionary spending.
• Check your CIBIL report first: Dispute any errors and ensure your score is 750+ before applying. A higher score gets you better rates and stronger negotiating power.
• Avoid multiple applications: Each loan application triggers a hard inquiry on your credit report. Apply to 2–3 lenders max within a 30-day window so it counts as a single inquiry.