Loan Prepayment Calculator
This Loan Prepayment Calculator helps you evaluate the potential savings from making early repayments on your personal loan. It's an essential tool for anyone looking to reduce their loan term and interest payments.
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Data Source and Methodology
All calculations are based strictly on the formulas and data provided by the ICICI Bank prepayment calculator.
The Formula Explained
Prepayment Savings: \( \text{New Term} = \frac{\text{Loan Amount} - \text{Prepayment Amount}}{\text{Monthly Payment}} \)
Glossary of Terms
- Loan Amount: The total amount borrowed.
- Interest Rate (%): The annual interest rate of the loan.
- Loan Term: The duration over which the loan is to be repaid.
- Prepayment Amount: The amount paid in addition to the regular payments to reduce the loan balance.
How It Works: A Step-by-Step Example
Suppose you have a $100,000 loan at a 5% interest rate over 15 years. By prepaying $10,000, you reduce your loan term by approximately 1 year, saving $5,000 in interest payments.
Frequently Asked Questions (FAQ)
What is a Loan Prepayment?
Loan prepayment refers to the payment of more than the scheduled principal amount, reducing the loan balance and the interest over time.
How does prepayment affect my loan?
Prepayment typically reduces the loan term and total interest paid, saving you money in the long run.
Can I prepay any loan?
Most loans allow prepayments, but it's essential to check with your lender for any penalties or conditions.
Is there any penalty for prepayment?
Some lenders may charge a prepayment penalty to compensate for interest lost. Review your loan agreement or consult your lender for details.
How should I decide the amount to prepay?
The amount to prepay should be based on your financial situation and the potential interest savings. Consider consulting a financial advisor for personalized advice.