Paying off a Personal Loan ahead of schedule is a wise decision. If your income has improved or you have received a bonus. Early Loan closure not only brings peace of mind but also significantly reduces your interest burden. However, many borrowers hesitate to prepay due to uncertainties around charges, savings, and process clarity. However, a Personal Loan prepayment calculator is helpful in such situations.
Let us understand how it works, why it is beneficial, and how to use it effectively to become debt-free faster without incurring hidden charges.
Understanding the Foreclosure Month
One unique feature of the Personal Loan calculator is that it automatically accounts for the foreclosure month based on the number of EMIs you have already paid. The foreclosure month plays a crucial role in calculating the outstanding balance and any applicable charges. The earlier in your tenure you prepay, the more you save on interest. With a calculator, you can estimate your total due amount for any specific month and repayment time.
Details required to use the calculator
Using the calculator is simple and does not require any login or personal data. You need to enter:
- Loan amount: The total amount borrowed at the time of Loan disbursal.
- Loan tenure (in months): The full duration of the Loan as per your agreement.
- Annual rate of interest: The interest rate applicable to your Loan.
- Number of EMIs paid: The number of instalments you have paid so far.
- Month of foreclosure: The month in which you plan to pay off the Loan amount.
- Prepayment fees: Mention the prepayment charges levied by your lender.
Once you submit these values, the calculator displays your outstanding Loan balance.
How does the calculator help you plan the pre-closure?
Here is what makes the Personal Loan prepayment calculator especially useful:
Accurate outstanding balance
You may think you can multiply your EMI by the number of months left to find your balance. However, that is incorrect. Each EMI includes a principal part and an interest part. The calculator uses a reducing balance method to show the actual amount due.
Includes pre-closure charges
If applicable, the calculator considers pre-closure charges while calculating the total amount you must pay. The calculator provides a realistic, all-inclusive figure, ensuring there are no surprises when you approach the lender.
Allows strategic planning
If you adjust the number of EMIs already paid, you can test different scenarios. For example, you can check how much you can save by closing the Loan after 18 EMIs, or whether it would make more sense to close it after 24 months. This helps you time your pre-closure when it is most beneficial to your finances.
Conclusion
Paying off your personal loan early is a financially rewarding decision, but only if done right. A Personal Loan pre-closure calculator empowers you to plan with clarity, accuracy, and confidence. Knowing your exact outstanding balance and charges, you can make an informed decision about closing your Loan ahead of schedule.
