5 Ways to Calculate Early Loan Repayment and Save Money!

Knowing how to calculate early loan repayment is important, especially if you plan to pay off your vehicle loan ahead of schedule. Early repayment can help reduce your financial burden and give you full ownership of the car faster. However, it may also come with additional costs that must be carefully considered.

Before deciding to pay off your car loan early, it’s crucial to understand how to calculate the total amount you’ll need. Let’s take a closer look below!

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What Are the Types of Fees in Early Loan Repayment?

Before getting into the formulas, you need to understand the types of fees typically associated with early car loan repayment. These fees vary depending on the financing institution’s policy, the loan term, and the number of remaining installments.

• Early Repayment Fee: This fee is a compensation for the leasing company or financial institution because the loan is paid off earlier than scheduled. The fee usually ranges from 2% to 5% of the remaining loan principal.

• Late Payment Penalty: If you have any overdue payments before early settlement, the penalty will also be added to your total repayment amount. This fee is generally about 5% of the monthly installment and is calculated based on the number of days late.

• Provision Fee: Some financial institutions charge a provision or administrative fee to cover operational costs related to the early repayment process. This typically ranges between 1%–2% of the remaining loan balance and is paid once during the settlement process.

• Annual Fee: Annual fees are usually charged for credit management services such as administration or insurance policy renewal. If you pay off your loan early, the unused portion of this fee can sometimes be prorated based on the remaining term.

• Insurance Fee: In vehicle loan schemes, insurance premiums are usually paid upfront and cover the full loan period. If you settle your loan early, a portion of the premium may be refunded on a prorated basis depending on your lender and insurance company’s policy.

How to Calculate Early Loan Repayment

Once you understand the types of fees, it’s time to learn how to calculate early loan repayment correctly. This step helps you estimate the total amount needed to pay off your car loan before its due date.

1. Calculate the Remaining Loan Principal and Accrued Interest

The first step is to determine how much principal balance and accrued interest you still owe.

Simple Formula:

• Remaining Principal = Total Loan – (Principal per Installment × Number of Months Paid)

• Accrued Interest = Total Interest – Accumulated Interest Paid

Example:

If you have a Rp90 million loan with a 36-month term and a flat 2% monthly interest, and you want to pay it off in the 10th month:

• Principal per month: Rp90 million ÷ 36 = Rp2,500,000

• Monthly interest: 2% × Rp90 million = Rp1,800,000

• Total interest paid: Rp1,800,000 × 9 = Rp16,200,000

• So, the remaining principal is Rp90 million – Rp22,500,000 = Rp67,500,000.

You’ll need to pay off this remaining principal plus the interest accrued for the 10th month.

Read Also: 8 Steps to Apply for a Car Loan the Right Way

2. Use Savings or Bonuses as a Funding Source

Early loan repayment is usually done using accumulated funds such as personal savings, investment returns, or annual work bonuses. This approach helps you reduce monthly financial pressure without affecting your daily expenses.

3. Calculate the Early Repayment Penalty

Every financial institution has its own policy regarding early repayment penalties, usually expressed as a percentage of the remaining principal.

Example:

If your remaining principal is Rp40 million and the penalty rate is 4%, then:

• Penalty Fee = 4% × Rp40 million = Rp1,600,000.

• Total repayment amount: Rp40 million + Rp1,600,000 = Rp41,600,000.

4. Calculate Late Payment Penalties (If Any)

If you have any late payments before early settlement, the penalty will also be included in your total.

Formula:

(5% × Monthly Installment) / 30 days × Number of Days Late

Example:

If your monthly installment is Rp2 million and you’re 6 days late, the penalty is:

[(5% × Rp2 million) / 30] × 6 = Rp20,000.

5. Pay the Early Settlement Administration Fee

Administrative fees are usually determined based on the borrower’s age and the loan amount.

Example:

If you’re under 50 years old and your loan limit is Rp80 million, the administrative fee is around 3% of the limit, or Rp2,400,000.

For borrowers above 50 years old, the fee is slightly higher, around 3.5% of the loan limit.

Read Also: Car Loan Without Down Payment? Here’s How to Do It

Early Loan Repayment Regulations

Although many financing institutions allow early repayment, there is no specific regulation from Bank Indonesia or the Financial Services Authority (OJK) that governs this in detail.

The policy regarding early car loan repayment is usually stipulated in the loan agreement between the borrower and the financial institution.

According to OJK Circular Letter No. 13/SEOJK.07/2014, every Financial Services Provider (PUJK) must uphold the principles of fairness and transparency in making agreements.

If a customer feels disadvantaged by the early settlement process, under Article 29 of the OJK Law, they have the right to file an official complaint to OJK. The institution will mediate and help resolve the dispute according to applicable legal provisions.

Therefore, understanding how to calculate early loan repayment helps you avoid miscalculations and ensures sound financial decision-making.

If you want to manage your car installments more efficiently and flexibly, make sure to choose a trusted and transparent financing company.

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With an easy-to-use loan simulation system, you can calculate installments based on your financial capacity, enjoy competitive interest rates, and receive transparent service from an institution supervised directly by the Financial Services Authority (OJK).

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