Free lending tool
Early settlement calculator
Twelve payments into a 24-month loan, what does it cost to close it today? There is no single answer. The same loan settles at three different figures depending on how the lender hands back interest the borrower is no longer going to owe — and most people are quoted one of them without being told which. This works out all three, plus any settlement fee, and what settling actually saves.
The loan and where you are in it
Flat charges interest on the full original amount for the whole term. Reducing balance charges it only on what is still owed.
Settling early
Out of 24 instalments in total.
Leave at zero to settle exactly on a payment date.
Each payment is applied to the interest earned by that date and then to principal. What is left is what is owed. The fairest method, and the one regulators generally prefer.
A charge some lenders levy for closing a loan early. A percentage applies to the outstanding balance, not the original loan amount.
Settle today for
ZAR 5,449.31
Saves ZAR 550.69
With 12 instalments still to run.
- Outstanding balance
- ZAR 5,449.31
- Interest rebated
- ZAR 550.69
- Settlement figure
- ZAR 5,449.31
If the loan runs to term instead
- Payments remaining
- 12
- Still to pay if you continue
- ZAR 6,000.00
- Interest saved by settling
- ZAR 550.69
The same moment, priced each way
What this loan settles at under each method the lender might apply.
- Actuarial — true outstanding balance
- ZAR 5,449.31
- Rule of 78s
- ZAR 5,480.00
- No rebate — every instalment due
- ZAR 6,000.00
This flat quote really costs 18.16% on a reducing balance, and that is the rate the actuarial payoff amortises at.
An estimate for comparison. Your loan agreement decides which rebate method applies and whether a settlement fee is due, so ask the lender for a formal settlement quote before paying.
Every point you could still settle
What closing the loan costs after each remaining instalment, and what that saves against carrying on to the end.
Opens in Excel, Sheets or any spreadsheet.
| After payment | Payments left | Settlement figure | Interest saved |
|---|---|---|---|
| 12 | 12 | ZAR 5,449.31 | ZAR 550.69 |
| 13 | 11 | ZAR 5,031.76 | ZAR 468.24 |
| 14 | 10 | ZAR 4,607.90 | ZAR 392.10 |
| 15 | 9 | ZAR 4,177.62 | ZAR 322.38 |
| 16 | 8 | ZAR 3,740.83 | ZAR 259.17 |
| 17 | 7 | ZAR 3,297.43 | ZAR 202.57 |
| 18 | 6 | ZAR 2,847.32 | ZAR 152.68 |
| 19 | 5 | ZAR 2,390.41 | ZAR 109.59 |
| 20 | 4 | ZAR 1,926.58 | ZAR 73.42 |
| 21 | 3 | ZAR 1,455.73 | ZAR 44.27 |
| 22 | 2 | ZAR 977.75 | ZAR 22.25 |
| 23 | 1 | ZAR 492.55 | ZAR 7.45 |
What you owe is not what you have left to pay
Settling early is one of the few places in lending where the obvious arithmetic gives the wrong answer, and where the difference goes straight into somebody’s pocket.
- 1
The balance is not the sum of the payments left
Those payments contain interest for months the loan will no longer run. Settle early and that interest is never incurred, so charging it would be charging for nothing. What is genuinely owed is the principal still outstanding plus the interest earned up to the day of settlement.
- 2
Actuarial against the Rule of 78s
The actuarial method applies each payment to the interest earned by that date and then to principal, so the balance is simply what remains. The Rule of 78s allocates interest by sum-of-digits, loading more of it into the early months. On the same loan the second always leaves the borrower owing more, which is why several markets restrict or ban it.
- 3
Why flat-rate loans punish settling early
A flat rate fixes the interest on the original amount the day the loan is written, so it is not tied to the balance at all. Halfway through, the schedule’s own balance column is no help — it tracks principal and ignores how the interest was earned. The honest figure comes from restating the flat quote as the reducing rate it really costs, then reading the balance off that.
- 4
Settlement fees change the answer
Some lenders charge for closing a loan early, as a percentage of the balance or a flat amount, to recover a return they had already priced in. Where it is permitted it is often capped, and in a number of markets it is prohibited outright. Add it here to see whether settling still saves anything once the charge is paid.
The same loan, settled three ways
Ten thousand borrowed at 10% flat over 24 months, settled straight after the twelfth payment. The remaining instalments come to 6,000 — but only one of these figures is what the borrower actually owes.
| Method | How it works | Payoff |
|---|---|---|
| Actuarial | Each payment goes to the interest earned by that date, then to principal. What is left is the balance. | 5,449.31 |
| Rule of 78s | Interest allocated by sum-of-digits, weighted towards the early months, so less of it comes back. | 5,480.00 |
| No rebate | Every remaining instalment falls due in full, interest for unrun months included. | 6,000.00 |
The gap between the first row and the last is 550.69 on a 10,000 loan. Which one applies is settled by the loan agreement rather than by arithmetic, so the early settlement clause is worth reading before you commit to paying.
Flat Rate vs Reducing Balance ComparatorQuestions about settling a loan early
- The amount that closes the loan completely on a given day: the principal still outstanding, plus interest earned up to that day, plus any fee the agreement allows. Pay it and nothing further is owed.
- Because those payments include interest for months the loan will no longer be running. Settling early means that interest is never incurred, so it should not be charged. How much comes off depends on the rebate method the agreement applies.
- A way of allocating a flat loan’s interest across its term using sum-of-digits weights, so more of it counts as earned in the early months. It rebates less than the actuarial method on every loan, and it is restricted or banned in a number of markets for that reason.
- The loan agreement says. Look for a clause on early settlement, prepayment or rebate of charges. Where the law prescribes a method, it overrides whatever the agreement says.
- Usually, but not always. A large settlement fee can outweigh the interest rebate, particularly near the end of a term when there is little interest left to rebate. Enter the fee above and the tool will report a negative saving where that is the case.
- Its interest is fixed at the outset on the original amount, so it never tracks the balance. To find the honest payoff the quote has to be restated as the reducing rate it really costs — 10% flat over 24 months is 18.16% reducing — and the balance read off that instead.
- They add interest for the part-period between the last instalment and the day of settlement, which is how a dated settlement quote is built. They apply only to the actuarial method: the other two are assembled from whole instalments that already contain the period’s interest, so accruing on top would charge it twice.
- This tool prices settling in full. A partial prepayment is a different calculation — depending on what the agreement allows, it either shortens the term or reduces the instalment, and the interest saved differs accordingly.
- No. The whole calculation runs in your browser, and the exports are generated on your own device. Nothing you type is sent to a server, saved, or logged, and there is no sign-up.
What is an early settlement figure?
Why is the payoff less than my remaining payments?
What is the Rule of 78s?
Which method will my lender use?
Does settling early always save money?
Why does a flat-rate loan behave so differently?
What do the days since the last payment do?
Can I settle only part of the loan?
Is my data stored?
Settlement quotes that match the agreement
Lendbox holds each product’s rebate method and early settlement terms alongside its rate, then applies them when a borrower asks to close a loan early — so the figure the agent quotes, the figure on the statement and the figure that actually clears the loan are the same figure.
No credit card required.
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