At a Glance
- Enter your loan details and select the ERC structure your lender uses – the calculator supports four common types and produces the estimated charge for each – how this calculator works
- The net position is the key output – it shows whether the interest you save by settling early is greater than the ERC you pay, and by how much – understanding the net position
- ERC structures vary significantly between lenders – percentage of outstanding balance, months of interest, sliding scale, and percentage of original loan all produce different charges on the same loan – the four ERC structures explained
- Always check your loan agreement for the exact ERC that applies – the calculator uses the structure and rate you enter, not your actual lender terms – how do I find out what ERC applies to my loan?
- Partial overpayments are also modelled – enter an overpayment amount to see the ERC and interest saving on that amount alone – modelling a partial overpayment
ERC Calculator
Early repayment charge calculator
See what your ERC could cost — and whether settling early still saves money overall. All figures are illustrative examples only.
Your loan
ERC structure — select the type your lender uses
Set the ERC percentage for each year of the loan. Year 2 is your current year — shown highlighted.
This structure charges a fixed percentage of the original loan regardless of how much has been repaid — it typically applies in full even for partial settlements.
What are you looking to do?
Assumes the same monthly payment continues, shortening the remaining term.
ERC charge
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Interest saved
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Net position
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Figures are illustrative only. Actual ERC structures, outstanding balances, and lender terms vary. This calculator is not financial advice — check your loan agreement or contact your lender for the exact charge that would apply.
How this calculator works
Enter your loan details
Input the original loan amount, APR, original term, and how many months you have already paid. These figures allow the calculator to work out your current outstanding balance and the interest remaining on the loan.
Select your ERC structure
Choose from four common ERC types: percentage of outstanding balance, months of interest, sliding scale, or percentage of the original loan. Select the type that matches your loan agreement and enter the relevant rate or number of months.
Choose full settlement or partial overpayment
Select whether you want to model a full early settlement – clearing the entire remaining balance – or a partial overpayment of a specific amount. For a partial overpayment, enter the amount and the calculator assumes your normal monthly payment continues, shortening the remaining term.
Read the net position
The calculator shows the estimated ERC, the interest you would save by settling or overpaying, and the net position – the overall financial gain or cost after the ERC is subtracted from the interest saving. A positive net position means settling early still saves money overall.
The four ERC structures explained
Early repayment charges are not calculated the same way by all lenders. The structure used determines how much you pay and how that figure changes as the loan progresses. Knowing your structure before you model the numbers matters – the same loan amount and ERC rate can produce very different charges depending on which method applies.
Percentage of outstanding balance
The charge is calculated as a percentage of the amount you still owe at the point of settlement. As you repay the loan, the outstanding balance falls, so the ERC also falls over time. This is the most common structure and is generally the most favourable for borrowers who repay later in the term, since the charge reduces as the balance reduces.
Months of interest
The charge is calculated as a set number of months of interest on the outstanding balance. Two or three months of interest is typical. Like the percentage of balance structure, this charge reduces as the balance reduces, but the number of months charged stays fixed regardless of when in the term you settle. It can be more predictable to model, but costly if the outstanding balance remains high.
Sliding scale
The charge rate itself changes depending on which year of the loan you are in. A common pattern is a higher percentage in the early years that steps down annually – for example 5% in year one, 4% in year two, 3% in year three, and so on. This structure rewards borrowers who wait longer before settling, and the calculator lets you set the percentage for each year individually to match your agreement.
Percentage of original loan
The charge is calculated as a fixed percentage of the original loan amount, not the outstanding balance. This means the charge does not reduce as you repay – you pay the same ERC in year four as you would in year one. This is typically the least favourable structure for borrowers who have repaid a significant portion of the loan, since the charge bears no relation to how much is actually left to settle.
Understanding the results
The ERC figure alone does not tell you whether settling early is worthwhile. What matters is the net position – the difference between the interest you save by not completing the full term and the ERC you pay to exit early. A positive net position means you come out ahead financially. A negative net position means the ERC costs more than the interest you save.
When settling early makes sense
The net position is most likely to be positive when you are settling in the later part of the term – by which point the ERC has reduced but a meaningful amount of interest still remains – or when the ERC is a small percentage and the remaining interest is large. It is also worth considering non-financial reasons to settle: clearing the charge against your property, releasing equity, or simplifying your finances may justify a modest negative net position in the right circumstances.
When to wait
If the ERC is large relative to the interest saving – particularly under an original loan percentage structure early in the term – waiting until the ERC falls or expires entirely is often the better course. Many secured loan ERC periods expire after a fixed number of years, after which early repayment is penalty-free. Check your agreement for the ERC end date and model both scenarios to see what the timing difference is worth in practice.
Frequently asked questions
What is an early repayment charge on a secured loan?
An early repayment charge is a fee your lender charges if you repay all or part of your secured loan before the agreed end of the term. It compensates the lender for the interest income they lose when a loan is cleared earlier than expected. Not all secured loans have ERCs – some products are penalty-free for early repayment – but fixed rate products in particular commonly include them, particularly during the fixed rate period.
The charge can be structured in several ways: as a percentage of the outstanding balance, as a set number of months of interest, as a sliding scale that reduces each year, or as a percentage of the original loan. Each structure produces a different charge on the same loan, which is why it matters to know which type applies before deciding whether to settle early.
How do I find out what ERC applies to my loan?
The ERC structure and rate for your loan will be set out in your original loan agreement, typically in the section covering early repayment or prepayment terms. If you no longer have a copy, your lender is required to provide the information on request – contact them directly and ask for the current ERC schedule and the outstanding balance figure they would use to calculate the charge.
It is worth requesting the lender’s own ERC calculation alongside the outstanding balance before making any repayment decision, rather than relying solely on the calculator. Lenders occasionally use slightly different amortisation conventions or have applied payment holidays or variations that affect the outstanding balance used in the ERC calculation.
Do I pay an ERC on a partial overpayment?
It depends on your loan agreement. Some lenders allow a certain amount of overpayment each year without triggering an ERC – commonly 10% of the outstanding balance per year. Others apply the ERC to any amount repaid above the contracted monthly payment. If your agreement includes an overpayment allowance, it is worth checking whether your planned overpayment falls within it before modelling the ERC.
The calculator applies the ERC structure to the full overpayment amount unless you are using a structure where the charge only applies above a threshold. If your lender offers a penalty-free overpayment allowance, model only the amount above that threshold to get an accurate picture of the actual charge.
Can an ERC make early settlement not worth it?
Yes. On some loan structures – particularly percentage of original loan ERCs applied early in the term – the charge can exceed the interest saving, producing a negative net position. In those cases, settling early costs more than completing the loan as agreed. The calculator’s net position output makes this visible: if the figure is negative, waiting until the ERC reduces or expires is likely the better financial outcome.
The exception is when there are non-financial reasons to settle – clearing the charge on your property, freeing up equity for another purpose, or simplifying your financial commitments. In those cases a modest negative net position may still represent a worthwhile outcome depending on your circumstances.
What happens to the ERC if I remortgage or take a new secured loan?
If you are remortgaging or taking a new secured loan to replace an existing one, any ERC on the existing loan still applies and becomes a cost of the transaction. It needs to be factored into the comparison between staying with the existing product and switching. This is particularly relevant when comparing a remortgage against keeping a secured loan, or when refinancing one secured loan with another.
The secured loan vs remortgage comparator does not currently model ERCs within its figures – they should be added manually to the cost of whichever route involves settling an existing loan early.
Squaring Up
An early repayment charge is not necessarily a reason to avoid settling early – but it is a cost that needs to be weighed against the interest you save. This calculator makes that comparison straightforward by showing the net position alongside the raw ERC figure.
- The net position is what matters. A large ERC can still produce a positive net outcome if the remaining interest is larger. A small ERC can produce a negative net outcome if you are close to the end of the term and little interest remains.
- ERC structures produce very different charges. Percentage of original loan structures are typically the most costly for borrowers who have repaid a significant portion. Sliding scale and percentage of balance structures reduce over time.
- Check your actual loan agreement first. The calculator uses the structure and rate you enter. Your lender’s exact figures may differ – always get their calculation before acting.
- Many ERCs have an expiry date. If the ERC end date is approaching, modelling both settling now and waiting until the charge expires can reveal whether the saving is worth the wait.
- Partial overpayments are worth modelling too. If your lender allows penalty-free overpayments up to a certain limit each year, maximising that allowance each year can reduce the loan faster without triggering any charge at all.
- ERCs affect remortgage and refinancing decisions. If switching products, the ERC on your existing loan is a transaction cost that must be included in any cost comparison.
If you are weighing up whether to settle a secured loan early as part of a wider decision – such as remortgaging or taking a new secured loan – the comparator tools below can help you build the full cost picture.
All figures are illustrative only and are not a quote, offer, or financial advice. Calculations use the standard annuity formula and the ERC structure and rate you enter. Actual ERC structures, outstanding balances, and lender terms vary. Always check your loan agreement or contact your lender for the exact charge that would apply before making any repayment decision. Your home may be repossessed if you do not keep up repayments on a mortgage or other debt secured on it.
