The saving is real money, but so are early-repayment fees some lenders charge. Knowing both numbers before you commit lets you check whether paying off early is genuinely worth it — sometimes it is not.
How it is calculated
Interest saved = (M × remaining payments) − payoff balance today
M is the fixed monthly payment on the loan.
Remaining payments is how many scheduled payments are left after today.
Payoff balance today is the outstanding balance after the payments already made — computed with B = P × (1 + r)^k − M × ((1 + r)^k − 1) ÷ r.
The difference is the future interest you avoid by settling now. Any early-repayment fee should be subtracted from this saving.
Example
Consider a 100,000 THB loan at 12% per year over 24 months, with payments of 4,707.35 THB. After 12 payments, the outstanding balance is 52,981.56 THB. Following the schedule would cost another 12 × 4,707.35 = 56,488.17 THB.
Settling today therefore saves 56,488.17 − 52,981.56 = 3,506.61 THB in interest. If the lender charges, say, a 1,000 THB early-settlement fee, the net saving drops to 2,506.61 THB — still positive, so paying off early wins in this case.
Understanding your result
The interest saved is your negotiating number. If a fee nearly cancels it, ask the lender to reduce or waive the fee — or simply keep paying on schedule and put spare money elsewhere.
Before transferring a payoff, confirm the exact settlement figure with the lender in writing, including any fees and the date it is valid until — balances change slightly with each passing day.
When you do settle early, close the paper trail: get a signed loan settlement agreement or final payment confirmation stating the debt is fully discharged. The saving matters little if the loan is not clearly marked as finished.
Frequently asked questions
Why is my payoff amount less than the sum of my remaining payments?
Each future payment contains interest that has not accrued yet. Settling today means that interest never arises, so the payoff balance is smaller than the remaining payments added together. The gap between the two is exactly your saving.
When does early repayment save the most?
Early in the loan. Interest is charged on the outstanding balance, which is largest at the start, so clearing the debt in the first third of the term cancels far more future interest than doing so near the end. Late in the loan the saving can shrink to almost nothing.
Are early repayment fees normal?
Some lenders charge them, often as a percentage of the settled balance or a few months of interest, to recover the income they lose. Practices and legal limits vary by country and product. Check your agreement for a prepayment clause before assuming the full saving.
Is a partial extra payment worth it if I can't pay everything off?
Usually yes. Any extra amount reduces the balance immediately, so all future interest is charged on less. Depending on the agreement, this shortens the term or lowers recalculated payments. Ask the lender to confirm in writing how they apply extra payments.
Does this calculation work for flat-interest loans?
Not directly. In flat-interest arrangements the total interest is fixed at the start, so paying early may not reduce it unless the lender agrees to a discount. For those loans, the question is negotiation rather than arithmetic — ask what settlement figure the lender will accept, and get it in writing.
What documents should I collect when settling a loan early?
A written settlement quote from the lender, proof of the payoff transfer, and a signed confirmation that the debt is fully discharged — a final payment confirmation or settlement agreement. Keep them together; they are your protection if the loan is ever claimed to be outstanding later.
Results are estimates for general information only and may differ from a lender's exact figures. They are not financial or legal advice.