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Early Loan Settlement

  • 11-12-2013 6:52pm
    #1
    The Dagda
    Closed Accounts Posts: 1,345 ✭✭✭


    Does anyone know how a bank calculates the amount for an early settlement of a loan?

    For example;

    Loan for 10,000 over 5 Years at 6.5% APR

    Total amount repayable €11687.85

    Repayments €195 per month.

    If you settle after 2 years you've already paid €4680

    So early settlement means the interest over 2 years, rather than 5, should mean a total debt of €10670.94.

    So the settlement amount should be around €6000?

    Is this correct?

    Or do banks use a different means of calculating the settlement amount?


Comments

  • #2
    phormium
    Registered Users, Registered Users 2 Posts: 3,442 ✭✭✭phormium


    Depends on the loan, copy of loan offer will probably tell you how they calculate early repayment. Straightforward variable rate loan will probably just be a case of pay off the outstanding balance now but others can be worked out to a specific formula which would vary between banks.


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