Loan Early Repayment Calculator

Interest is charged on your outstanding balance each month. Clear the debt sooner and there are fewer months of interest to pay. Even a partial overpayment reduces the balance that future interest is calculated on, so every extra pound works harder than the last.

To pay off a loan in full, you ask the lender for a settlement figure — the outstanding balance plus, under the Consumer Credit Act, up to 58 days' interest. This is the only meaningful charge on most regulated personal loans; there's usually no separate percentage penalty. The settlement figure is almost always less than continuing to pay every remaining instalment.

You don't have to clear the whole loan. A lump-sum overpayment cuts the balance, which either shortens the term or reduces future payments. Because it removes the most heavily-interest-bearing portion of the debt, overpaying early in the loan saves the most.

On a £15,000 loan at 7.9% over 60 months, after 18 payments a chunk of the balance remains. Settling now means paying that balance plus up to 58 days' interest — far less than the interest built into the remaining 42 instalments. The difference is your saving.

• Not asking for a settlement figure. Always get the official figure from the lender before paying off a loan.
• Ignoring higher-rate debt. Clearing a cheap loan while expensive credit card debt sits idle wastes the saving.
• Emptying your emergency fund. Don't overpay so aggressively that you have no cash buffer for emergencies.
• Assuming a big penalty. For most personal loans the only charge is up to 58 days' interest, not a percentage fine.