2 min read
Estimates the settlement balance now and the interest you'd save by paying a loan off early. Assumes a fixed-rate annuity and no early-settlement fee.
Why the saving is smaller than the halfway point
On a reducing-balance loan, interest is front-loaded — early payments are mostly interest because the balance is largest at the start. So by the time you are halfway through the term, you have already paid well over half the interest. Settling then saves the remaining, smaller slice.
The early-repayment charge
Many agreements carry an early-repayment charge, or use the Rule of 78 to reduce the interest rebate. Either can offset the saving. Always request a formal early settlement figure before deciding.
When early repayment wins
Clearing early tends to pay off when there is little or no ERC, when the loan is early in its term (more interest still to save), or when the money would otherwise sit idle. If the cash could earn more elsewhere, or the ERC is steep, keeping the loan may cost less.
Work out your saving
Use the calculator to estimate the interest saved by settling early, then subtract any charge to get the net benefit.
Where Credicorp fits
Credicorp lends to your company, not to you personally, and takes no personal guarantee. See indicative terms on business loans, or apply online in minutes.
Frequently asked questions
Does repaying early always save money?
Usually some, but not always net of charges. On a reducing-balance loan with no ERC it saves the remaining interest. A steep ERC or Rule of 78 rebate can wipe out the benefit.
Why does halfway not save half the interest?
Because interest is front-loaded — you have already paid most of it by the halfway point. The remaining interest, and therefore the saving, is smaller.
Should I overpay instead of settling?
Often, yes. Regular overpayments cut the balance and future interest without needing a lump sum, provided overpayments are allowed free of charge.
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Rule of 78
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Read →Funding for UK limited companies
Credicorp lends to your company, not to you personally — short-term working capital with no personal guarantee. See what your business could access.