Early Repayment Calculator: How Much Interest Will You Save?

Try the early repayment calculator

Use the tool above to model your own loan. Enter the outstanding balance, the annual interest rate (APR), how many monthly payments you have left, and any lump sum or extra monthly amount you're thinking of paying. It returns the interest you'd save and your new payoff date, so you can weigh the decision with real numbers rather than a hunch.

What early repayment actually means

Early repayment is simply paying back what you borrowed faster than your credit agreement requires. There are two ways to do it. You can overpay by adding extra to your normal monthly payment, or you can settle in full by clearing the whole remaining balance in one go. Both reduce the total interest you pay, because interest on most loans is charged on the balance still outstanding. Shrink the balance sooner and there's simply less of it left to attract interest.

That said, the headline saving you see is rarely the saving you keep. Most UK lenders are allowed to apply an early settlement charge, and some loans front-load interest, so the real benefit depends on the small print of your specific agreement. The point of an early repayment calculator is to separate the gross interest saved from the charges that eat into it.

How the early repayment calculator works

The maths rests on one idea: interest accrues on the balance you still owe. Pay the balance down faster and the interest clock slows. In plain words, the saving is the difference between two totals.

Interest saved = total interest on the original schedule − (interest paid up to early repayment + any early settlement charge).

For a regular overpayment, the calculator recalculates your amortisation. Each month it works out the interest portion (monthly rate × current balance), subtracts the rest of your payment from the balance, then applies your extra payment straight to the principal. Because the principal falls faster, every later month carries less interest, and the term shortens. The monthly rate is the annual rate divided by 12, so a 9.9% APR works out at roughly 0.825% a month.

For a full settlement, the figure is different. Under the Consumer Credit Act 1974, lenders can charge up to one month's interest on a settlement made early, plus up to another month's interest if more than 12 months remain on the agreement. So a lender can ask for up to around 58 days of interest as a settlement adjustment. The calculator estimates this so the saving you see is closer to the cash you'd genuinely pocket.

Three things change the result more than anything else: your interest rate, how much of the term is left, and whether interest is calculated on a reducing balance or front-loaded. The earlier in the term you act, the bigger the win, because that's when the most interest is still due to be charged.

Worked example: how much interest you save by repaying early

Take Priya, a teacher in Leeds with a £10,000 personal loan at 9.9% APR over five years (60 months). Her contractual monthly payment is about £212, and if she runs the full term she'll repay roughly £12,720 in total, meaning about £2,720 in interest.

She gets a £3,000 bonus and decides to overpay it as a lump sum after 18 months. At that point her balance is around £7,400. She pays £3,000 straight off the principal, bringing the balance to about £4,400, and keeps her £212 monthly payment running. Because the balance is now much smaller, the loan clears in roughly 22 more months instead of 42, and she saves in the region of £560 in interest and almost two years of payments. The exact figure depends on her lender's daily interest method, which is why she checks it against her actual statement.

Now compare a full settlement. Suppose instead Priya wins enough to clear the whole £7,400 at the 18-month mark. The lender applies an early settlement charge of up to two months' interest, roughly £120 on that balance. Her gross interest saving over the remaining term might be around £900, so after the charge she nets close to £780. The charge doesn't wipe out the benefit, but it's real money, and it's exactly the kind of figure people forget to factor in.

Early repayment charges explained

An early repayment charge (sometimes called an early settlement fee) is the lender's permitted compensation for losing future interest. For regulated personal loans, the Consumer Credit Act caps it: the lender can deduct up to one month's interest, plus a further month's interest where the agreement has more than a year still to run. In practice that's a modest penalty on most personal loans, not a deal-breaker.

Other products behave very differently. Car finance arranged as hire purchase or PCP can carry larger settlement figures and, with PCP, an optional final balloon payment that changes the picture entirely. Credit cards usually have no early repayment charge at all, so overpaying a card is almost always pure saving. Mortgages are a separate world, often with percentage-based early repayment charges during a fixed deal; if that's your question, our property tools below are a better fit.

Overpaying vs settling in full

Both reduce interest, but they suit different situations. Regular overpayments give you flexibility: you keep some cash in reserve, you can pause if money gets tight, and you still trim months off the term. Settling in full delivers the cleanest result, removing the debt and the monthly commitment in one move, but it ties up a larger sum and triggers the settlement charge.

• Choose overpayments if you want to stay liquid, your loan has no overpayment penalty, and you'd rather not empty your savings.
• Choose full settlement if the interest rate is higher than what you'd earn on that money in a savings account, and clearing the debt buys you genuine peace of mind.
• Think twice if you'd be draining an emergency fund or paying down a cheap loan while leaving expensive credit-card debt untouched.

A useful rule of thumb: if your loan rate is higher than the after-tax return on your savings, repaying early usually wins financially. With instant-access savings interest taxable above your Personal Savings Allowance, a typical loan at 9% or 10% APR is hard to beat by leaving the money in the bank.

Things to watch before you repay early

The calculator gives you the shape of the saving, but a few real-world traps catch UK borrowers out:

• Request a settlement figure in writing. Don't guess. Your lender must give you an official settlement quote, valid for a set number of days, that already includes any charge and rebate of unearned interest.
• Front-loaded interest. Some agreements (and older Rule of 78 contracts) load more interest into the early months, so settling late in the term saves less than a simple calculator suggests.
• Partial overpayments may not shorten the term automatically. Some lenders reduce your monthly payment instead. If your goal is to be debt-free sooner, tell them to keep the payment the same and shorten the term.
• Keep an emergency buffer. Throwing every spare pound at a loan can leave you reaching for a credit card the moment the boiler breaks, which usually costs more than the loan you cleared.
• Check your priorities. Clear the most expensive debt first. There's little sense settling a 6% loan early while carrying a 24% card balance.

Common mistakes

The biggest error is treating the gross interest saving as the net benefit. Always subtract the settlement charge before you decide. The second is assuming all loans rebate interest the same way; daily-interest personal loans are straightforward, but hire purchase and some store credit are not. A third mistake is overpaying a loan that has no penalty at irregular times and assuming it reduces the term, when the lender has quietly cut the monthly payment instead. Finally, people often repay early using money that was earning more elsewhere, or money they shortly need back, then face a fresh, pricier borrowing decision weeks later.

One more: APR is not the same as the flat rate sometimes quoted on car finance. If you only have a flat rate, the true cost is higher than it looks, and the calculator's APR-based estimate may understate your saving. When in doubt, work from the settlement figure your lender provides rather than your own arithmetic.

External guidance

The independent, government-backed service MoneyHelper explains your rights when repaying a loan early, including the statutory caps on early settlement charges under the Consumer Credit Act. It's worth a read before you ask your lender for a settlement quote.

These figures are estimates for guidance only and are not personal financial advice. Always work from the official settlement figure your lender provides before making a decision.

Related calculators

If you're still shopping around or planning the numbers, these tools pair well with early repayment planning. Compare your options with our loan calculator to see the full cost of borrowing, check your schedule with the loan repayment calculator, or model a specific product using the personal loan calculator. If you're juggling several debts, the debt consolidation calculator shows whether rolling them into one is cheaper than clearing them individually.