How prepayment works for each repayment type
Interest on a gold loan builds up each month on what you still owe, so money paid off the loan early stops earning interest from then on. How much you save, and whether the loan ends sooner, depends on how the loan is repaid.
On equal monthly instalments (EMI) the calculator keeps your normal payment the same and adds your extra money, so the loan is paid off in fewer months. On a loan with interest paid each month, your normal payment is the interest and the loan is due at the end. Extra payments shrink the loan, so the monthly interest falls, and the loan can finish sooner if you clear it. On a bullet loan, with everything due at the end, extra payments cut the interest that builds up, and the saving is paid when the loan closes.
Interest on the last two types is simple, so unpaid interest is not added to the loan. Money paid in the final month changes nothing, because that month's interest has already built up and the loan is settled that month anyway.
Worked example
On an EMI loan of ₹3,00,000 at 12% a year with 12 months left, the normal payment is ₹26,654.64 a month and the interest would be ₹19,855.64. Paying ₹5,000 a month extra saves ₹3,098.08 and clears the loan in 11 months.
Paying ₹10,000 a month extra instead saves ₹5,258.29 and clears the loan in 9 months. A one-off ₹1,00,000 lump sum paid today saves ₹10,898.74 and clears it in 8 months.
On a bullet loan of ₹1,00,000 at 9.9% a year for 6 months, the interest is ₹4,950.00. Paying ₹50,000 off after 3 months cuts it to ₹3,712.50, which saves ₹1,237.50. The loan still runs the full 6 months, because half of it remains. If the same loan were paid with interest each month, the part payment saves the same ₹1,237.50.
Paying ₹20,000 a month off the bullet loan clears it in 5 months and saves ₹2,475.00, because the loan is gone before the sixth month. If your lender charges 1% of what you prepay, the ₹50,000 part payment costs a charge of ₹500.00 and leaves a saving of ₹737.50.
To see the payments and total cost of a gold loan before you prepay, use the gold loan calculator.
For an ordinary instalment loan, the loan overpayment calculator works the same way.
Getting your gold back
Your gold is returned once the loan is fully repaid. Ask your lender for a closing figure that includes interest to the day, and check the agreement for any prepayment or foreclosure charge before you pay. The calculator takes it as a number you enter and starts at 0.
Inputs for the gold loan prepayment calculator
Repayment type
Equal instalments, interest each month with the loan at the end, or one payment at the end.
Gold loan balance
The amount left to repay on your gold loan, not counting interest still to build up.
Interest rate
Your current interest rate. The rate shown is only an example.
Rate is quoted
Choose per year or per month to match your loan.
Months left
How many months remain until the loan is due, from 1 to 60.
Extra each month
Money paid off the loan each month on top of what is due. Enter 0 for none.
One-off lump sum
A single part payment. An amount that covers the loan closes it. Enter 0 for none.
Lump sum paid after
Months from now. Enter 0 to pay it today.
Prepayment charge
A charge as a share of what you prepay. Enter 0 if your lender has none.
CALCULATOR QUESTIONS
Gold loan prepayment calculator questions
Can I prepay a gold loan?
Ask your lender whether part payments are accepted, how they are applied and whether there is a charge.
Does prepaying save interest on a bullet gold loan?
Yes. Interest builds up on what you still owe, so a part payment cuts it. In the example, ₹50,000 paid after 3 months saves ₹1,237.50.
Why is time saved zero on some loans?
A bullet or monthly-interest loan still runs to its due date unless you pay the whole balance. Only clearing the loan ends it sooner.
When do I get my gold back?
Once the loan is fully repaid. Ask your lender how soon after the final payment the gold is returned.
Will my lender charge me for prepaying?
It depends on your agreement. Check for early repayment or foreclosure charges and enter them in the prepayment charge box.