When you acquire a personal loan from a bank or credit union, you might have the option to pay it off earlier than the term of the loan. This indicates that you can pay off the loan’s principal as well as any interest that has accrued before the end of the loan’s term.
To exercise this option, you must have already made a few payments toward the personal loan. Find out if the bank offers personal loans that can be paid off early and if there is a penalty for doing so before making a final decision.
When you make a prepayment on a personal loan, you pay back all or part of the loan before the due date. Customers can save substantially if they repay their loans ahead of schedule. You can determine the impact that making early payments will have on your balance by using a personal loan prepayment calculator.
How does a prepayment calculator help you with your loan?
There are two ways to pay off a personal loan early: in full or in part. A personal loan prepayment calculator is a web-based tool that can help you figure out the EMIs you’ll have to pay each month on your loan balance.
It figures out your exact EMI by taking into account your loan amount, interest rate, the amount of your partial payment, and the length of your loan.
You can also use this calculator to figure out things like:
- Discounts on monthly interest payments
- Prepare for pay reductions and promotions
Calculating EMIs by hand may be difficult and time-consuming. But by using an online loan prepayment calculator, you can get off to a good start.
Prepayment calculator for personal loans
In the middle of a worldwide epidemic, borrowers need to pay off any personal debts as soon as possible. Personal loans are great for buying big things and handling financial emergencies, but the borrower should do everything possible to pay off as much of the principal as soon as possible.
Since the future is hard to predict, it makes no sense to lose the money in interest. When a loan is paid off, the borrower can ask the bank that gave them the loan to close their loan account. After putting in the necessary information, the personal loan prepayment calculator from the lending institution would give the closing cost.
How Do I Use the Prepayment Calculator for a Personal Loan?
This article provides a comprehensive guide on how to get a personal loan and make early loan payments with a calculator. Here’s how you can use the personal loan prepayment calculator to calculate how much you pay and the amount you save on prepayment.
- Enter the amount that you would like to borrow as the first step.
- After that, the length of the loan can be specified in either months or years.
- The next step is to key in the desired yearly percentage rate.
- Right now, you are responsible for the initial portion of the down payment.
- Enter the remaining number of months on your payment.
- Enter your prepayment amount
After entering all of the information shown above, you will be presented with an accurate estimate of the amount you will save on your loan. The loan prepayment calculator will provide you with the updated payback plan as well in case of partial prepayment.
What are the upsides of prepaying a personal loan?
Consider the following benefits of debt repayment:
Reduced Amount Paid in Interest
To begin, you can make a complete pre-payment on the loan balance at any moment during the period of the loan. If you follow this course of action, you may be able to reduce the amount of money you spend on interest payments.
The repayment period for a personal loan is typically one calendar year. After that, you will be able to settle any outstanding obligations by paying the total amount due. If you pay off your loan before the conclusion of the loan’s term, the total amount of interest that you will pay will be lower.
If the amount of money you have available is less than the total amount of the principal that is still owed on the loan, you are eligible to make a partial prepayment on the loan. You can make multiple partial prepayments to reduce your EMIs as well as your interest rate. If there are fees associated with paying off a personal loan early, then even a small amount paid toward the principal will not make a significant difference.
Better Credit Score
Your credit score will improve even if you prepay your loan. Even a partial prepayment will increase your credit score. A good credit score is important for getting loans in the future.
People should try to borrow as little money as possible and pay it back as quickly as they can for better financial health. So, whenever you get a chunk of money you can spare, put it towards the prepayment of your ongoing loan.
You should now have a good idea about using the loan prepayment calculator and how it works. Paying off a personal loan early has long-term benefits that go beyond lowering the total amount of interest you have to pay and reducing your debt.
It can be hard to figure out these EMIs by hand, but if you use an online calculator, you can do it in no time. If you do it regularly, you can use this method to keep track of your money and plan for the future.
Visit Piramal Finance if you are considering a personal loan and want to know more about the EMIs that will be due.