2 min read
Illustrative only. Assumes a fixed rate and equal monthly repayments (annuity). Your actual offer depends on Credicorp’s assessment of your company.
Why early repayment saves interest
On a reducing-balance loan, interest is charged on the outstanding balance. Pay it down early and you remove the interest that would have accrued on that amount — a real, immediate saving. The earlier in the term, the larger the saving.
Watch for settlement charges
Some agreements carry an early settlement charge that claws back some of the interest saved. Check the specific terms: a heavy charge can wipe out the benefit, while many loans allow penalty-free early repayment. See loan fees explained.
Consider the alternative uses of the cash
Cash used to repay a loan cannot fund stock, an order, or a buffer. If that cash would earn more than the loan's interest deployed in the business, repaying early may not be the best use. Weigh the interest saved against the return elsewhere.
Making the decision
Compare the interest you would save (net of any charge) against what the cash could otherwise do. If the saving wins and you keep enough buffer, repay early. See reducing loan cost.
Quantify the saving
Use the calculator to see the interest remaining on your loan and what early repayment would save.
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 a business loan early save money?
On a reducing-balance loan, usually yes — paying down early removes the future interest on that amount. The earlier in the term, the larger the saving, provided there is no heavy early-settlement charge.
Are there charges for early repayment?
Some loans carry an early-settlement charge that claws back part of the interest saved; many allow penalty-free early repayment. Check the specific agreement, as a heavy charge can offset the benefit.
Should I always repay a loan early if I can?
Not always. Cash used to repay cannot fund stock, an order or a buffer. If that cash would earn more in the business than the loan's interest, keeping it working may beat early repayment. Compare the two.
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