How to calculate loan early repayment interest
In recent years, with changes in the economic environment and adjustments to financial policies, early loan repayment has become the focus of many borrowers. Early repayment can not only reduce debt pressure, but also save interest payments. But how to calculate interest on early repayment? How do the rules differ between banks and loan types? This article will give you a detailed analysis based on the hot topics and hot content on the Internet in the past 10 days.
1. Basic principles for calculating early repayment interest
The interest calculation for loan early repayment is usually divided into two methods:Calculated based on remaining principalandPenalty interest as stipulated in the contract. Specific rules vary by bank and loan type, but here are common calculations:
| Calculation method | formula | Applicable scenarios |
|---|---|---|
| Calculated based on remaining principal | Remaining principal × daily interest rate × number of days in advance | Most business loans and mortgages |
| Penalty interest according to contract | Remaining principal × penalty interest ratio (such as 1%-3%) | Partial credit loan, consumer loan |
2. Prepayment rules for different loan types
Based on recent popular discussions, the following is a comparison of prepayment rules for mainstream loan types:
| Loan type | Early repayment threshold | Interest calculation method | Popular Bank Examples |
|---|---|---|---|
| mortgage | Requires repayment for at least 1 year | Remaining principal × remaining term interest rate | Industrial and Commercial Bank of China, China Construction Bank |
| credit loan | Unlimited | Remaining principal × penalty interest 1%-2% | China Merchants Bank, Ping An Bank |
| car loan | Requires repayment for at least 6 months | Remaining principal × daily interest rate × number of days | Bank of China, Bank of Communications |
3. Precautions for early repayment
1.liquidated damages issue: Some banks charge liquidated damages (usually 1%-2% of the remaining principal) for early repayment, and the contract terms need to be confirmed in advance.
2.Impact on repayment time: Under the equal principal and interest repayment method and the equal principal repayment method, the difference in interest savings from early repayment is large. The proportion of principal repayment in the early stage of equal principal is high, and early repayment in the later period is of less significance.
3.Policy changes: Mortgage interest rates will be lowered in many places in 2023, and some banks have launched an "early repayment without penalty interest" campaign. It is recommended to pay attention to the latest announcements from the banks.
4. Calculation of actual cases
Take a 1 million yuan mortgage with an interest rate of 4.9% and a term of 20 years as an example. Assume that 500,000 yuan is repaid in advance in the fifth year:
| calculated item | Equal principal and interest | Equal amount of principal |
|---|---|---|
| Original total interest | 570,665 yuan | 492,041 yuan |
| Remaining interest after early repayment | About 210,000 yuan | About 180,000 yuan |
| Save interest | About 360,000 yuan | About 310,000 yuan |
5. Expert advice
1.Prioritize repayment of high interest rate loans: If you have multiple loans at the same time, it is recommended to give priority to repaying credit loans or consumer loans with higher interest rates.
2.Pay attention to the opportunity cost of capital: If the investment income is higher than the loan interest rate, early repayment can be suspended.
3.Flexible options for partial repayment: Some banks support the combination of "partial early repayment + shortened term", which can further reduce interest expenses.
In summary, the calculation of interest on early repayment requires comprehensive consideration of multiple factors such as loan type, bank policy, and repayment method. It is recommended that borrowers verify the rules through official bank channels before operating, or use a professional loan calculator to conduct simulation calculations.
check the details
check the details
en
