Thursday, 09 July, 2020

Calculation Of Early Repayment Of A Loan


Any loan as envisaged by current legislation can be terminated in advance at any time either completely or partially. In the event that we have the necessary capital at our disposal, we could also save a lot of interest, we might consider not waiting for the natural closing of the loan contract but proceeding with the closure in advance.

To request early redemption, however, it is necessary to know the exact amount of the residual capital net of unearned interest and other possible costs should not be written off as they are not accrued.

We will have to request the extinction statement in which the loan will show us the calculation for the early repayment of the loan.

 

Calculate early settlement

Calculate early settlement

We provide you with this handy tool to calculate the remaining amount to be paid in order to pay off the loan in advance.

Enter the remaining installments, the installment amount and the tan. This last data will be used to calculate the interest that will be reversed.

RATE RESIDUE 67 8533.7638440862
INSTALLMENT AMOUNT 181  
TALKING RATE 0.1327  
PRESUMED COUNTING 8533.7638440862  

 

Costs of early repayment of a loan

A loan as already written can be extinguished even partially at any time and if foreseen by the contract penalties can be applied which must correspond to the following amounts:

  • To 1% of the amount relating to the residual capital to be repaid if the residual life of the contract is more than one year
  • At 0.5% of the amount relating to the residual capital to be repaid if the residual life of the contract is equal to or less than one year
  • For a debt equal to or less than € 10000 no penalty can be provided

In any case, these costs will not affect our choice whether to pay off the loan or not, because in any case the savings will certainly be greater.

 

Partial extinction of the loan

Partial extinction of the loan

A loan can also be extinguished partially so even if we do not have the entire capital available to cover the extinction of the residual debt we can

However, pay part of it to the finance company.

In this case, the installment to be paid will be re-proportioned with respect to the new residual capital which will in any case be lower. In this case it is a good habit to contact the financial company in advance to understand the procedures, as for partial extinction it is useless to request the extinction count which only provides for the calculation for the total closure of the loan.

 

Is it worthwhile to pay off a loan early?

Is it worthwhile to pay off a loan early?

But when is it convenient to pay off a loan before the natural maturity? Let’s say that in most cases we always have savings on contractual interests if we decide to terminate the contract early.

Clearly the greater convenience in saving the interest we have at the beginning of the amortization plan and therefore in the first years of the loan.

The end will probably have paid almost all the interest and it is a good idea to consider how convenient it is to extinguish it in advance by having to get rid of its own liquidity.