Early repayment savings calculator

What this calculator does

If your business has spare cash, clearing a loan early can save real money — but how much? This calculator estimates the interest you'd avoid by settling ahead of the original term. You enter the outstanding balance, the interest rate, the months remaining and how many months early you'd settle, and it returns the approximate interest saved.

It's built for UK limited companies sitting on surplus cash and wondering whether to use it to pay down debt. The answer isn't always yes — the saving has to be weighed against any early-settlement charge and against what else the cash could do — but you can't make that call without first knowing the number this tool gives you.

How to use it

Pull these from your loan statement:

1. Outstanding balance — the capital still owed today, not including future interest.
2. Interest rate — the annual rate on the agreement.
3. Months remaining — how many payments are left under the original schedule.
4. Months to settle early — how much sooner you'd clear it. Settling six months early on a loan with eighteen left means paying it off at the twelve-month mark.

The result is the estimated interest you'd save. The earlier you settle and the higher the rate, the larger the saving — but always check your agreement for an early-repayment charge before deciding, because that can offset part or all of it.

How to read the result — and the catch

The headline is the interest saved: the future interest that simply stops accruing once the capital is gone. On a high-rate, short-term facility this can be meaningful, because so much of each remaining payment is interest rather than capital.

The catch is the early-repayment charge (ERC). Many agreements let you settle early, but some levy a fee — sometimes a flat charge, sometimes a slice of the remaining interest — that eats into the saving. A few products charge nothing. The decision is simple arithmetic once you have both numbers: if the interest saved comfortably exceeds any ERC, settling early puts money back in the business; if the ERC swallows most of the saving, it may not be worth it. Credicorp facilities are designed to be flexible on early settlement — but always read your own agreement.

The formula in plain English

The estimate works on the interest that would have accrued over the period you're cutting short:

Interest saved ≈ remaining interest under the schedule − interest accrued up to the early-settlement point

In practice, on a reducing-balance loan, the interest you save is the portion of your future payments that represents interest rather than capital repayment. A simple approximation is the outstanding balance multiplied by the monthly rate, summed across the months you're removing. Then:

Net benefit = interest saved − any early-repayment charge

The principle is that you only ever save the interest, never the capital — you still have to repay everything you borrowed; you simply stop renting it sooner.

Worked example

A company owes £15,000 on a loan at 18% a year, with 12 months remaining. It has the cash to settle 6 months early.

Roughly, the interest on the balance over those final six months works out to around £800 saved (the balance reduces as it's repaid, so it's not a flat 18% on the full £15,000). If the agreement carries no early-settlement charge, that £800 stays in the business. If there's a £300 ERC, the net benefit is £500 — still worthwhile. If the ERC were £900, settling early would cost more than it saves. Figures are illustrative.

Limitations and what to weigh

This is an estimate; your lender's exact early-settlement figure, taken from the agreement, is the number that counts. The calculator also can't tell you whether settling early is the best use of the cash. Money that clears an 18% loan saves 18% — but if that same cash is your only buffer, depleting it to save interest can leave you exposed to a quiet month or an unexpected bill.

Weigh the saving against keeping the cash for resilience, and against what the money could earn elsewhere. Before settling, check your runway with the cash runway calculator and confirm you'll keep enough working capital using the working capital calculator. This is general information, not financial advice — and always confirm any early-settlement charge with your lender.