Loan Overpayment Calculator

If you've taken out a personal loan, car loan or other fixed-term credit, paying it off early can save you a surprising amount of interest. In the UK you have a legal right to repay regulated consumer credit early, in full or in part. But lenders may charge a small fee in some cases, so it's worth knowing the numbers first.

Our Loan Overpayment Calculator shows how much interest you'd save and how much sooner you'd be debt-free. This guide explains how loan overpayments work, your rights and the fees to watch for.

How loan interest works

Most personal loans charge interest on the outstanding balance each month. Your fixed monthly payment covers that month's interest plus part of the balance. Early in the loan, interest takes a bigger share; later, more of each payment reduces what you owe.

When you overpay, the extra goes straight to the balance. That lowers future interest, so the loan clears faster. The higher the APR and the longer the remaining term, the more you save.

How to use the calculator (Loan Overpayment Calculator)

Enter a few details from your loan statement:

1. Your current balance, the amount you still owe.
2. The APR on your loan agreement.
3. The number of months left.
4. How much extra you can pay each month, and any one-off lump sum.

The calculator works out your normal monthly payment, how many months it would take to clear with and without overpayments, the interest you'd save and any early repayment fee your lender could charge.

A worked example

Suppose you owe £10,000 at 9.9% APR with 36 months left. Your normal payment is about £320 a month.

If you pay an extra £100 a month:

• You'd clear the loan in about 27 months, nine months sooner.
• You'd save roughly £400 in interest.

Try different amounts in the Loan Overpayment Calculator to find the right balance between saving interest and keeping money in your pocket.

Your right to repay early

Under the Consumer Credit Act, you have the right to repay a regulated loan early at any time, either partly or in full. To repay in full, ask your lender for a settlement figure. They must give you one, and it will show the amount needed to clear the loan on a particular date, including any rebate of future interest.

Early repayment fees

For most regulated loans taken out from February 2011, lenders can only charge compensation for early repayment in limited circumstances:

• The fee can only apply if you repay more than £8,000 early in any 12-month period.
• It can be no more than 1% of the amount repaid early if more than a year is left on the agreement, or 0.5% if a year or less is left.
• It can't be more than the interest you would have paid.

So on most typical overpayments, there's no fee at all. Older agreements, and some loans such as mortgages or business finance, may have different rules, so check your agreement.

Is overpaying a loan a good idea?

Overpaying a loan is often a good use of spare money, especially if:

• the APR is higher than what you'd earn on savings, which is usually the case
• you already have an emergency fund
• you don't have more expensive debt, such as credit cards, which should be cleared first

If interest rates on savings are high, compare the after-tax return with your loan APR. Our savings interest calculator can help.

Monthly overpayments vs a lump sum

A lump sum early in the loan saves the most interest, because it immediately reduces the balance. Regular monthly overpayments are easier to budget for. Some lenders don't accept partial overpayments online, so you may need to phone or ask how they'd like to receive them.

When you overpay, ask whether the lender will shorten the term or reduce your monthly payment. Shortening the term usually saves more interest.

Other ways to reduce what you pay

• Refinancing: if your credit score has improved, a new loan at a lower APR could cut costs. Watch out for fees, and use our loan repayment calculator to compare.
• Balance transfer: for smaller debts, a 0% balance transfer credit card can save interest, but check the fee and what happens when the offer ends.
• Avoid extending the term: lower payments over longer periods usually mean paying more interest overall.

Making an overpayment step by step

1. Check your agreement for any rules on partial repayments.
2. Contact your lender to ask how to make an overpayment and whether it will shorten the term or reduce your payments.
3. Make the payment by the method your lender gives you, and keep a record.
4. Check your next statement to confirm the balance has gone down by the right amount.