Loan & Early Repayment Simulator
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📅 Monthly Amortization Schedule
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How the Loan & Early Repayment Simulator Works
The Loan & Early Repayment Simulator is designed to help users understand how loan repayment behavior changes over time, especially when early repayments are applied. The calculator follows standard amortization mathematics used by banks and financial institutions, while additionally modeling the financial impact of partial prepayments.
Key Inputs
- Initial loan principal
- Fixed annual interest rate
- Loan term (in years, converted to months)
- Early repayment month and amount (optional)
- Early repayment strategy selected by the user
All calculations assume a fixed interest rate and monthly repayment frequency. The simulator does not include fees, penalties, taxes, or variable interest adjustments.
Interest Rate Conversion
The annual interest rate entered by the user is converted into a monthly rate using:
Monthly Interest Rate (r) = Annual Interest Rate ÷ 12 ÷ 100
This monthly rate is applied to the outstanding balance at the beginning of each repayment period.
Base Monthly Payment Formula
The simulator uses the equal-payment (annuity) formula as the baseline repayment structure:
Monthly Payment (M) = P × r × (1 + r)ⁿ ÷ [(1 + r)ⁿ − 1]
Where P is the loan principal, r is the monthly interest rate, and n is the total number of monthly payments.
Monthly Amortization Logic
For each repayment month, the simulator calculates:
- Interest = Remaining Balance × Monthly Interest Rate
- Principal = Monthly Payment − Interest
- New Balance = Previous Balance − Principal
These values are stored sequentially to generate the full amortization schedule and balance chart.
Early Repayment Modeling
When an early repayment is applied, the simulator deducts the specified amount directly from the outstanding loan balance at the selected month. The subsequent repayment behavior depends on the chosen early repayment strategy.
1. Shorten Term (Term Reduction)
Under the term reduction option, the monthly payment remains unchanged. Instead, the remaining loan duration is recalculated so that the loan is paid off earlier.
Remaining Term ≈ log(M ÷ (M − Balance × r)) ÷ log(1 + r)
This approach reduces total interest cost while keeping monthly cash flow stable.
2. Reduce Payment (Payment Reduction)
With the payment reduction option, the remaining loan term stays the same, but the monthly payment is recalculated based on the reduced balance.
New Monthly Payment = Remaining Balance × r × (1 + r)ᵐ ÷ [(1 + r)ᵐ − 1]
This option lowers monthly repayment burden but may result in higher total interest compared to term reduction.
Charts and Visual Outputs
- Principal vs Interest Chart: Shows the proportion of total repayment allocated to principal and interest.
- Balance Over Time Chart: Visualizes how the outstanding loan balance decreases each month, including the effect of early repayment.
Data Sources and Methodology
All calculations are deterministic and derived directly from user input. The formulas used are consistent with standard loan amortization models commonly found in banking systems, financial textbooks, and public financial calculators. No external market or pricing APIs are used.
Limitations
- Does not account for variable or floating interest rates
- Does not include early repayment penalties or fees
- Assumes payments are made exactly on schedule
- Results may differ from lender-specific calculation rules
Intended Use
This simulator is intended for educational and planning purposes only. It helps users compare repayment scenarios, understand interest dynamics, and evaluate the impact of early repayments. It is not a substitute for official loan contracts or professional financial advice.
This calculator provides estimated results for informational purposes only. The output does not constitute financial, investment, or legal advice. Always consult qualified financial professionals or lending institutions before making loan or repayment decisions.
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