A loan foreclosure calculator estimates the lump sum required to close a loan early and the total interest saved. It factors in:
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.
To use a loan foreclosure calculator, follow the steps given below:
The EMI prepayment calculator may also display how your EMI will change after the prepayment.
The following are some of the main benefits of using an early loan repayment calculator:
There are mainly two types of loan prepayments:
Prepayment can be made for different types of debts and obligations.
Various factors determine the amount needed to foreclose a loan. Below are the details of these factors:
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.
Here are some important things to consider before foreclosure of your loan:
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.
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.
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.
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.
You can use a loan foreclosure calculator to calculate the loan foreclosure amount and interest savings.
Loan foreclosure charges or prepayment penalties typically range from 2% to 5% of the outstanding principal amount.
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.
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.
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.
Home loan prepayment can either reduce EMIs or make the tenure shorter, but not both simultaneously. You can choose either option.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.