# How to use an early settlement loan calculator

How to use an early settlement loan calculator, calculate how much you owe on your loan so that you can pay what you owe back early as a lump sum.

How to use an early settlement loan calculator, calculate how much you owe on your loan so that you can pay what you owe back early as a lump sum.

You can use an early loan settlement calculator if you want to pay your loan back early, maybe you want to change lenders and want to know the size of loan you must get with another lender or maybe you have a lump sum from an insurance or compensation payout or early retirement and want to use the money to pay off your loan.

Here’s how you calculate the early loan settlement, well use a worked example and then you can swap in your own figures to calculate the early loan settlement for your own loan, lets say you borrowed £10,000 over 2 years (24 months) and have had the loan for 6 months and the loan has an APR (Average Percentage Rate) of 10%, I’ve made all these figures up for the purposes of an example, so just swap in your own figures.

First lets calculate how much interest you pay on the loan, that’s the loan amount divided by one hundred and multiplied by the APR, £10,000 / 100 * 10 = £1,000 total interest to be paid on the loan, now lets calculate the monthly interest repayment that’s the total interest repayment divided by the number of months that you have taken the loan out for, so that’s £1,000 / 24 months = £41.66 in interest to be paid each month.

Now lets calculate the principal (the amount of money you pay each month to pay off the loan),so that’s £10,000 / 24 months = £416.66, so the total amount your repaying each month in both principal loan repayments and interest repayments is £41.66 per month interest repayment plus £416.66 per month principal loan repayment which equals, £41.66 + £416.66 = £458.32, so that’s the total amount your repaying each month in both loan repayment and interest charges.

So if you have had the loan for 6 months then your total repayment to date is £458.32 total monthly repayment x 6 months = £2,749.92, now the total cost of the loan is £458.32 * 24 months = £10,999.68 due to rounding error we can round that up to £11,000, so the early settlement loan amount is the total loan amount minus the loan amount that you have repaid, £11,000 - £2,749.92 = £8,250 so to pay off the loan in a lump sum you must pay back £8,250 to clear the loan.

Now if your lender charges you an early repayment fee your have to add that to the total amount and if your lender calculates interest repayments in any other way then yoour need to take that into account, the worked example assumes that no reduction in interest repayments are made as you pay off the loan, so the actual amount you might have to pay back may be less than the amount in the worked out example, also note that the numbers chosen here for APR and amount borrowed where just chosen to be an illustrated example and you can substitute your own figures, if your lender provides their own loan settlement calculator then you should assume that to be more accurate than anything you find on the internet.

So why might you want to pay your loan off early anyway, one of the most common reasons is because ‘you don’t like your lender’, you think they are charging you for things that other lenders don’t charge for and are always aggressive on the telephone or in letters to you, well you could take out a loan against your car and use that money to repay the outstanding loan and have some money left over to spend any way you like.

A loan against your car is called a logbook loan, so called because the loan is secured against your vehicles V5C registered keeper document which for many years was called a logbook, not that a logbook loan or to give it it’s other name is a car title loan, your borrowing the money against your car, you apply online for a logbook loan and use the money the lender gives you to repay the outstanding loan, the loan is secured against your car which means the lender is the owner of your car until you pay the loan off, some logbook lenders will require that you post them the V5C document that was sent to you by the DVLA when you bought the car, the lender would then keep hold of this document until the loan is paid off, not all lenders to keep your V5C document though.

The advantage of a logbook loan is that it is a secured loan which means that the interest rate charged is lower than higher risk loans like personal loans or unsecured loans, indeed you may find that the APR quoted to you on the loan quotation is a lot less than your current APR, so your be saving yourself money.

Many logbook lenders offer debt re-consolidation logbook loans or top up logbook loans which are specifically designed for using the new logbook loan to pay back the first loan and have money left over for yourself, with a loan against your car you are using your car as security for your loan, unsecured loans like personal loans are always more expensive.

You might be wondering what exactly the APR is in the above calculations, APR stands for Average Percentage Rate and it is the cost of the loan, no lender lends you money for free, when you pay back the loan you make a monthly repayment each month that will consist of paying back the principal (the amount you actually borrowed) plus the interest charge (lenders profit).

You can borrow the actual amount that your car is worth minus 20%, so if your car is worth £10,000 then your be able to borrow £8,000, this is the amount of money your be given as a loan against your car, the actual amount you have to pay back will be the amount you have borrowed £8,000 in our example plus the APR of the loan, if the loan APR was 10% then the total amount you would have to pay back would be £8,800 the APR on a logbook loan will be lower (much cheaper) than a personal loan APR as the value of your car acts as security against the loan.

Your car can have a second hand value of between £250 and £50,000 to get a logbook loan, that means that the minimum the logbook lender will lend you is £250 and the maximum they will lend you will be £50,000 you can borrow the full value of your car (borrow as much as you can) or you can borrow a smaller amount that is just what you need, for example if you are looking to pay off a more expensive loan with a logbook loan then you might decide to only borrow the exact amount of money you need to pay off the loan.

Of course all loans are subject to status, what this means is subject to your financial status, if you have a poor or bad credit history then that status is poor and your likely to be refused an unsecured loan, with an unsecured loan the lender will look at your credit score and won’t want to lend to you if you have a poor credit score, or sometimes an unsecured lender will say that if you can find a guarantor for your loan then they will still lend to you.

A guarantor is when a friend or member of your family guarantee to make any loan repayments when you are unable too, so if you take the loan out and are making monthly payments and then don’t have the money to make a payment the lender will hold the guarantor responsible for the loan repayment, you still get the loan but the guarantor is ultimately responsible for paying back the loan and who do you know that will take on that financial responsibility on your behalf, not many people which is why guarantor loans aren’t very popular.

With a logbook loan your car is acting as the guarantor for your loan, it is your cars value that is the guarantee for the loan and as many more people own cars than have friends or family able to be guarantor for a loan logbook loans have become very popular.

Do you save money by paying off a loan early? Yes, you do because in many cases compound interest is used to calculate a loan this means that paying off early reduces the amount of interest your would be paying on the loan and with less interest to pay the loan is cheaper, in the worked example I’ve calculated the worse case scenario, the most that you will have to pay back with early settlement, most lenders should be able to offer you a better deal than this and save you money.

What is a settlement figure for a loan? it’s the amount that you must pay back if you want to pay the loan off early, the worked example above shows how to calculate early loan repayment (early settlement) yourself, but your lender will be able to provide you with this figure which should be cheaper than working through the example yourself as the lender probably reduces the amount your borrowing dependent on the loan amount outstanding (reduced fees after taking compound interest rates into account).

How do you calculate loan payments? You take the loan amount, the term you are borrowing for (how long in months you are borrowing the money for) and the APR and you make this calculation, loan amount divided by one hundred multiplied by the APR and divided by the number of months you have the loan, as an example assume we borrow £5,000 over two years (24 months) with an APR of 5%, £5,000 + 5% = £5,250,and dividing by the number of months that we have the loan for tells us the total monthly repayment of the principal and the interest, £5,250 / 24 months = £218.75 per month.

What is settlement for a house? If you have a mortgage and want to pay off the mortgage early you will need to pay the settlement fee, this is calculate in the same way that we calculated early settlement for a personal loan above.

With an unsecured loan you don’t get a personalised loan quote as all quotations are called soft quotes or no credit footprint quotes, an unsecured lender or broker can’t simply make a loan application with your details as the loan would have to be reported to the credit reference agencies, too many loan applications or a loan refusal and your credit score will be lowered, so soft quotes which don’t involve a credit check are used to give you an idea of the loan that you would get, but its only an idea the exact amount you can borrow and interest you will be charged are only revealed to you when you make a real application the soft quote is only a guide and not a very accurate guide at that.

On the other hand logbook loan quotes are not soft quotes they are the real quote and the quote details exactly the loan that your get if you choose to take the loan out, the reason logbook lenders don’t need soft quotes is that the lender uses their own lending criteria and does not have to report loan quotes or applications to the credit reference agencies.

Your get a quick decision with a logbook loan as when you request an online quotation that’s the exact quote your get for the loan, your cars details are checked online and the money can be in your bank account the very same day, ideal if you want to settle a loan quickly or take out a new loan.