How it works
The calculator first derives what you must be paying. From your outstanding balance, rate and remaining tenure it computes the instalment using the same reducing-balance engine as the other loan calculators — so the baseline it compares against is your actual schedule, not an approximation.
It then replays the loan month by month with the same instalment, applying your extra payments on top. Each prepayment cuts the balance immediately, which cuts every subsequent month's interest, which means more of each future instalment goes to principal. The effect compounds in your favour.
More detail
Because the instalment stays the same while the balance falls faster, the loan simply runs out of months early. That is why the headline results are interest saved and months saved rather than a lower EMI.
Prepaying early is worth substantially more than prepaying late, because interest is charged on the outstanding balance and there is more remaining term for the saving to accumulate over. The timing scenario below makes that concrete.
To model a housing loan from the beginning rather than mid-way, use the home loan EMI calculator.
To weigh prepaying against investing the same money instead, project it with the SIP calculator.