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Example data table
| Scenario | Principal | APR | Months left | EMI | Savings | Penalty | Closure cost | Status |
|---|---|---|---|---|---|---|---|---|
| Comfortable buffer | ₨1,200,000 | 18% | 24 | ₨61,000 | ₨2,000,000 | 1% | ~₨1,222,000 | Affordable |
| Thin emergency fund | ₨800,000 | 16% | 18 | ₨50,000 | ₨900,000 | 2% | ~₨816,000 | Risky |
| Not enough savings | ₨500,000 | 20% | 12 | ₨46,000 | ₨300,000 | 0% | ~₨500,000 | Not affordable |
Formula used
- Monthly rate: r = (APR ÷ 100) ÷ 12
- Monthly interest: Interestₘ = Balanceₘ₋₁ × r
- Principal paid: Principalₘ = EMI − Interestₘ
- Balance update: Balanceₘ = Balanceₘ₋₁ − Principalₘ
- Estimated remaining interest: sum of Interestₘ across remaining months
- Penalty amount: Penalty = Payoff × (Penalty% ÷ 100)
- Total closure cost: ClosureCost = Payoff + Penalty + ProcessingFee
- Savings after closure: SavingsAfter = Savings − ClosureCost
- Emergency fund needed: EmergencyNeed = MonthlyExpenses × EmergencyMonths
How to use this calculator
- Enter your outstanding principal from the latest lender statement.
- Fill in APR, months remaining, and your current EMI.
- Add your income, expenses, and the savings you can use.
- Include any penalty and processing fee shown in your loan terms.
- Set emergency fund months to protect your cash reserves.
- Press Calculate to see closure cost, cashflow impact, and affordability status.
- Download a CSV or PDF report after calculation for sharing or records.
Helpful notes and disclaimer
- This tool provides estimates. Lenders may add daily interest, taxes, or extra charges.
- For an accurate payoff amount, request an official payoff quote from your lender.
- Consider liquidity needs, job stability, and upcoming large expenses before using savings.
Early closure decisions start with liquidity
Early closure can reduce interest and remove payment risk, but it can also drain cash that protects you from emergencies. A practical buffer is three to six months of essential expenses. If your monthly expenses are 90,000 and you target four months, the reserve goal is 360,000. Closing early should ideally leave that amount untouched.
Total closure cost is more than the payoff
Your lender’s payoff figure is usually the outstanding principal plus any accrued interest to the settlement date. Add penalties and fees to estimate total cash required. For example, a principal of 1,200,000 with a 1.0% penalty adds 12,000. If processing fees are 5,000, the total closure cost becomes 1,217,000 before small daily interest adjustments.
Interest saved should be compared to alternatives
Keeping the loan means paying interest over the remaining months. This tool estimates remaining interest from your EMI, rate, and tenure. Compare that avoided interest with the potential growth of keeping savings invested. If estimated remaining interest is 260,000 and your savings could earn 8% annually, the investment gain over the same horizon might be 170,000, so the net financial edge of closure is about 90,000.
Cashflow testing improves confidence
Affordability improves when monthly surplus is stable. Surplus equals income minus expenses minus EMI. If income is 250,000, expenses are 150,000, and EMI is 70,000, current surplus is 30,000. After closure, the surplus becomes 100,000. That extra room can help rebuild savings, handle variable bills, and reduce missed-payment risk.
Use status signals to guide next steps
“Affordable” generally means you can pay the closure cost and still meet your emergency target. “Risky” means you can pay, but reserves fall short, so consider partial prepayment or delaying closure. “Not affordable” suggests your savings are insufficient. Always confirm charges with an official payoff quote and review taxes, insurance changes, and upcoming large expenses. Track your surplus for two months, then decide. A written plan helps keep closure savings and reserves separate always.
FAQs
1) What payoff amount should I enter?
Use the latest outstanding principal from your lender statement. For best accuracy, request an official payoff quote that includes accrued interest and any settlement-date adjustments.
2) Why does the tool mark my case as risky?
Risky typically means you can cover closure costs, but your savings after closure fall below your chosen emergency fund target. You may still close early, but liquidity becomes tight.
3) What if my EMI is too low for the interest?
If EMI does not cover monthly interest, the balance may not reduce as expected. Recheck rate, principal, and EMI. Use the lender schedule if available, or adjust EMI to realistic terms.
4) Does early closure always save money?
Not always. Savings depend on remaining interest, penalties, fees, and what your cash could earn elsewhere. The tool compares estimated interest avoided with estimated investment gain to support judgement.
5) How should I choose emergency fund months?
Many households use three to six months of essential expenses. If income is variable or you have dependents, choose a higher value to reduce the chance of needing costly borrowing later.
6) Can I use this for partial prepayment decisions?
Yes. Enter the remaining principal you would close and compare outcomes. For detailed partial-prepayment options, consider adding a second scenario run and comparing closure cost and liquidity impact.