Do you know how much it costs to repay your loan early?
16/07/2026
So, you’ve decided to use some of your savings to pay off the loan that has been weighing you down for a while now. Early repayment in full means repaying all the outstanding capital on a loan before its maturity date. You might also choose to make a partial early repayment, which means repaying only part of the outstanding capital.
Paying off the loan early means more than just repaying the outstanding capital. You’ll also need to pay any interest that has built up since your last payment, plus any charges that apply. Let’s do the sums:
- Outstanding capital.
- Unpaid interest accrued up to the effective date of repayment.
- An early repayment fee or compensation, if applicable under the contract and the relevant legislation.
- Any other charges specifically provided for in certain transactions.
Accrued interest is the interest that has accumulated from the date your last instalment was paid until the exact date on which you repay the loan. It can be calculated using this general formula:
Accrued interest = Outstanding capital × Interest rate × (Days elapsed/Annual day-count basis)
Where:
- Outstanding capital: the current balance of the loan.
- Interest rate: the applicable annual nominal interest rate.
- Days elapsed: the number of days since your last interest payment.
- Annual day-count basis: normally 365 days (360 in some contracts).
For example, suppose you have a loan with:
- Outstanding capital €20,000
- Annual nominal interest rate: 6%
- Last instalment paid 20 days ago
The accrued interest would be:
20,000 × 0.06 × 20/365 = 65.75 €
The total amount payable would be €20,065.75, plus any applicable fees. Of this amount, €20,000 is the outstanding capital and €65.75 is accrued interest.
If you repay your loan early, you may still need to pay interest for the time you had the money since your last instalment. This interest is worked out based on the number of days since your last interest payment.
