Early Loan Repayment Penalty Calculator

What is Early Loan Repayment Penalty? How is it Calculated and Which Loans Apply?

Paying off your loan before its maturity can save you significant interest costs. However, for some loans, this early repayment may trigger a prepayment fee, also called an early termination penalty.

This guide covers:

• What is an early repayment penalty?

• Which loans have it?

• How is it calculated?

• Typical rates for mortgage loans.

💡 You can use the Early Loan Repayment Calculator above to quickly see the penalty amount in a few seconds.

What is Early Loan Repayment?

Early loan repayment is the full settlement of the remaining principal of your loan before the maturity date, ending the loan early. It is usually preferred to save on interest.

What is Early Loan Repayment Penalty?

The early repayment penalty is a fee charged by the bank for loans settled before maturity. It compensates the bank for the loss of interest income that would have been earned if the loan had continued.

Which Loans Apply?

• Mortgage loans: Early repayment penalty may apply. Rates usually vary depending on the remaining term.

• Car loans & personal loans: No penalty applies.

⚠️ Note: Prepayment penalties are not legally applied for car or personal loans.

Early Repayment Penalty Rates (Mortgage Loans)

• Remaining term ≤ 36 months: Typically 1% of the remaining principal.

• Remaining term > 36 months: Typically 2% of the remaining principal.

📌 Important: Rates may vary by bank. Check your loan agreement for exact rates.

How is the Penalty Calculated?

Penalty = Early Repayment Amount × Applicable Rate

Example:

• Early repayment amount: $100,000

• Remaining term: 30 months (≤ 36 months)

• Applicable rate: 1%

Penalty = 100,000 × 0.01 = $1,000

Benefits of Early Repayment

• Interest savings: You save on the interest that would be paid for the remaining term.

• Debt freedom: You are freed from monthly obligations sooner.

Things to Consider

• Read your contract: Early repayment fee and conditions vary by bank and loan type.

• Calculate actual savings: Consider the penalty when determining whether early repayment is financially beneficial.

• Check with your bank: Follow the official procedure for early repayment.

Frequently Asked Questions (FAQ)

🔹 Will I be charged a penalty for repaying a car loan early?
No, car and personal loans do not have prepayment penalties.

🔹 How is the mortgage early repayment penalty calculated?
It is 1% or 2% of the early repayment amount, depending on the remaining term.

🔹 Is the prepayment fee fixed?
No, it depends on the remaining term and your bank’s agreement.

🔹 Can the early repayment penalty be refunded?
Generally, no. It is applied according to the loan agreement.

Conclusion: Decide Early Repayment Wisely

Early loan repayment can be advantageous, but before doing so:

• Calculate the penalty amount

• Evaluate total savings

• Check procedures with your bank

🏦 Disclaimer: This calculator is for informational purposes only. For exact figures, consult your loan agreement or bank.