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Loan Prepayment Calculator

Use Our Loan Foreclosure Calculator

1125 lac
125
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Total Payments -

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Loan Repaid-
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Loan Balance-
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Penalty-
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Total pre-payment

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  • Loan Amount
  • Interest Rate
  • Total Payment
  • Tenure
  • ₹50,00,000
  • 10%
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What is a Loan Foreclosure Calculator

A loan foreclosure calculator estimates the lump sum required to close a loan early and the total interest saved. It factors in:

  • Outstanding Principal
  • Remaining Yenure
  • Interest Rate
  • Prepayment Penalties

Example: For a ₹20 lakh home loan at 8% interest with 10 years remaining, the calculator shows how much you’d save by paying off the loan 5 years early, minus any penalties.

Steps to Use the Loan Prepayment Calculator

To use a loan foreclosure calculator, follow the steps given below:

  • Enter your loan details, including the outstanding loan amount you wish to pay, the current applicable interest rate, and the remaining tenure (in years or months) left on your loan.
  • Then, provide the prepayment details like the lump sum prepayment amount you intend to make, and the frequency of prepayment (one-time, monthly, quarterly).
  • Finally, analyse the results to see your revised loan tenure and potential interest savings.

The EMI prepayment calculator may also display how your EMI will change after the prepayment.

Benefits of Using a Loan Foreclosure Calculator

The following are some of the main benefits of using an early loan repayment calculator:

  • Potential savings: The prepayment tool providеs a clеar undеrstanding of how much potеntial intеrеst savings you can achiеvе by making prеpaymеnts on your loan. It provides an easy-to-use Excel sheet with a prepayment option.  
  • Timе and effort saving: Instead of calculating potential savings manually, this tool provides you with instant results, saving your time and еffort. 
  • Financial planning: The loan closure calculator hеlps in crеating a stratеgic plan for prеpaying a loan. 
  • Comparison: When considering multiple prеpaymеnt scеnarios, an Excel calculator sheet with a prepayment option enables you to comparе thе various outcomes and make a wеll-informеd choice.
  • Improved credit score: Since the outstanding principal amount gets reduced, your debt amount also gets reduced, and hence, your credit score could increase.

Prepayment for Different Loan Types

There are mainly two types of loan prepayments:

  • Partial/ part prepayment: Under this option, the loan account continues to operate and is not closed. The EMI and/ or tenure might be adjusted after prepayment of a portion of the outstanding loan amount. This is an ideal option for those who get yearly bonuses or incentives. You can use the part payment calculator for making a partial loan prepayment.
  • Foreclosure/ pre-closure/ full prepayment: It is making an outstanding principal loan amount prepayment in full with a single instalment before the end of the tenure. In this option, after payment of the full outstanding amount, the loan account will be closed.

Prepayment can be made for different types of debts and obligations.

  • Corporations might prepay revolving lines of credit, short-term or long-term business loans, other debts, or even rent.
  • Consumers can prepay a personal loan/ home loan/ loan against property/ other loans through refinancing or making an entire/ partial prepayment from their own pocket.
  • Consumers can also prepay their credit card charges before receiving a statement.
  • Some loans, like fixed interest rate mortgage loans, car loans, or personal loans, may include prepayment penalties. These penalties are disclosed before signing the loan agreement.
  • You can use a personal loan prepayment calculator to calculate the savings by making a personal loan prepayment. Similarly, a car loan prepayment calculator can be used to calculate the savings made with a car loan prepayment
  • Some loans, like floating interest rate home loans, may come with zero prepayment charges. You can use the home loan prepayment calculator to calculate the savings by making a home loan prepayment.
  • It is advised to discuss prepayment charges and conditions before you apply for the loan.

Factors Affecting Your Loan Foreclosure Amount

Various factors determine the amount needed to foreclose a loan. Below are the details of these factors:

  • Outstanding loan amount: A larger principal amount remaining on the loan means a higher foreclosure amount. 
  • Type of loan: Different types of loans (such as home loans, personal loans, business loans, car loans) may have different foreclosure terms as well as charges.
  • Rate of interest: Higher interest rates usually result in higher interest payments. This can impact the total foreclosure amount. 
  • Repayment tenure: The remaining tenure of the loan also plays a significant role. Longer tenure loans may result in larger interest components, affecting the foreclosure amount. 
  • Prepayment charges: Many lenders levy a fee on foreclosure or partial prepayment of a loan, which can either be a percentage of the outstanding balance or a fixed amount. This can add to the foreclosure amount.
  • Lender’s policies: Every lender has their own policies regarding loan foreclosure charges, so it is important to review your loan agreement and understand all the terms. 
  • Overdue EMIs: Any unpaid/ overdue EMIs at the time of pre-closure is factored into the final amount. 
  • Type of interest rate: Floating interest rate loans may come with lesser foreclosure charges compared to fixed interest rate loans.
  • Prepayment option: Some loans may allow partial prepayments, which can decrease the outstanding principal and lower future interest payments.

Penalty Charges for Prepayment Loan

Banks, Non-Banking Financial Companies (NBFCs), or other financial institutions/ online lenders can charge prepayment penalties on some loans, such as personal loans, fixed-interest rate, and semi-fixed-rate loans. The prepayment penalty can vary between 1% to 5% of the outstanding loan amount.

Key Considerations Before Foreclosing a Loan

Here are some important things to consider before foreclosure of your loan:

  • Make sure you have an emergency fund set aside to cover unexpected expenses.
  • Be aware that paying your loan early might affect your tax deductions.
  • Check if there is any lock-in period attached to the loan before making a prepayment. For instance, some loans cannot be pre-closed before making 12 EMI payments or 1 1-year tenure.
  • Do not forget to assess your current as well ass future financial needs.

Frequently Asked Questions (FAQs)

✅ How to calculate the foreclosure amount?

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Loan foreclosure is the complete prepayment of your remaining loan amount in one payment instead of paying multiple EMIs. You can use loan prepayment calculator to calculate the foreclosure amount.

✅ How much prepayment is allowed in SBI home loan?

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The prepayment of SBI home loan can be done as per your financial needs. It can be done in two ways either by repayment of a lump sum of the remaining loan amount or repaying the lump sum amounts at periodic intervals once in a couple of months.

✅ How to use the home loan part-prepayment calculator?

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Using a home loan part-prepayment calculator is easy. The tool does the prepayment calculations based on the total loan amount, pending balance loan to be repaid, repayment tenure, rate of interest at which the loan was taken, total number of EMIs, and the foreclosure month. You just had to enter these details in the tool to know the outcome.

✅ How to calculate foreclosure amount of personal loan?

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Calculating the personal loan foreclosure amount with the help of a prepayment or foreclosure calculator is simple. It helps in the calculating the pending balance of the personal loan or other loan amount along with the interest payment by computing pending instalments. 

✅ How to calculate loan foreclosure?

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You can use a loan foreclosure calculator to calculate the loan foreclosure amount and interest savings.

✅ How much are foreclosure charges?

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Loan foreclosure charges or prepayment penalties typically range from 2% to 5% of the outstanding principal amount. 

✅ What is the RBI rule for foreclosure?

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As per the Reserve Bank of India’s (RBI) proposed rules, banks and NBFCs are generally prohibited from levying foreclosure charges/ prepayment penalties on floating interest rate loans. This applies to individual borrowers as well as micro and small enterprises (MSEs), except for some specific types of cooperative banks and NBFCs.

✅ Which is better, prepayment or foreclosure?

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Prepayment allows borrowers to make a gradual repayment of a portion, offering them flexibility and potential interest savings. However, foreclosure involves settling the entire loan amount, which can be a big financial obligation. Foreclosure reduces long-term interest but requires a lump sum payment.

✅ Is it good to foreclose a loan?

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If you foreclose your loan when you have sufficient funds to pay it off without compromising any of your emergency savings or other financial goals, then foreclosure is a good option. If the loan interest rate is high, pre-closure can save interest costs.

✅ Does home loan prepayment reduce EMI or tenure?

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Home loan prepayment can either reduce EMIs or make the tenure shorter, but not both simultaneously. You can choose either option.

✅ Is it good to prepay a personal loan?

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Prepayment of a personal loan can boost your credit score. It doesn't have any negative impact on your credit score. However, partial prepayments only work when you pay in a lump sum.

✅ Does prepayment of a car loan affect CIBIL score?

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Prepayment of a car loan can have mixed impacts on your credit score. While it reduces the outstanding balance, it also improves your credit utilisation ratio, which can negatively affect your CIBIL score due to reduced credit mix and average account age.

✅ Are there any charges or costs to be incurred in foreclosure of the loan?

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If you wish to repay your loan before the loan tenure ends, the lender may levy a prepayment penalty, also known as foreclosure charges. This penalty is charged to cover the lost interest revenue from the early closure of the loan. However, for some loans (like most home loans), the lender may offer prepayment without levying any charges.

✅ Which is the better option, to pay a lump sum or make regular monthly prepayments?

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Making a lumpsum prepayment is always beneficial because you tend to save a significant portion of interest. However, if you have the required income to make regular monthly prepayments, it is an excellent habit. You could end up saving a useful amount by reducing the residual tenure considerably.

✅ Is it advisable to reduce the EMI and maintain the tenure constant after a prepayment?

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It depends on the situation. If you have a high degree of financial stability, you can maintain the EMI as constant and reduce the tenure. You could end up closing the loan quicker. However, under specific circumstances, you might have to reduce the EMI.

✅ Why does the home loan repayment tenure reduce when you prepay a part of your home loan?

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As explained before, the EMI comprises of the interest repayment and principal repayment portions. Hence, any payment above the regular EMI will go on to reduce the principal amount. The EMI is directly proportional to the principal outstanding amount and the rate of interest. It is also inversely proportional to the tenure. Thus, if you do not reduce the EMI, the mandate will automatically reduce.

✅ What is the right time for making a prepayment of loans?

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The ideal timing for prepayment of any loan is in the initial stages of the loan. The home loan has an extended tenure. Hence, it is one of the best loans to make a prepayment. In the case of other loans, you should calculate the benefits that accrue from prepaying the loan amount using the loan Prepayment Calculator. If it is beneficial, you can proceed with the prepayment.

✅ Is it advisable to prepay any loan when I have surplus funds?

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It depends on the types of loans you have in your portfolio. Prepaying a home loan is beneficial because you end up saving considerable interest over the entire tenure of the home loan. It is also advisable to prepay personal loans because these loans come at a high cost. With investments in the market not fetching attractive returns today, it makes sense to prepay loans and get rid of the liabilities.

✅ Are there any restrictions from the bank side for the prepayment of loans?

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Usually, the nationalised banks do not place any restrictions on the prepayment of home loans. Private banks and housing finance companies have their internal policies. There could be restrictions on the amount of prepayment, the frequency of prepayment, and so on. As far as personal loans and other loans are concerned, there could be lock-in periods where the borrower cannot make any prepayment.

✅ Is it possible to use the loan Prepayment Calculator if there is a prepayment penalty factor?

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Yes, the loan Prepayment Calculator comes with an option where you can enter information concerning the penal rate of interest. If there is no penalty stipulation, the system allows you to leave the column blank. It is the most accurate tool to calculate the loan prepayment amount and benefits that accrue because of the prepayment.

✅ What is the difference between a part prepayment and a full prepayment?

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As the name suggests, the full prepayment results in the foreclosure of the loan. You get rid of the entire liability. In the case of a part prepayment, you reduce your existing commitment to the extent of the prepayment amount. The interest saving is an additional benefit.