Prepayment Fee Calculator
Early loan repayment fee.
Enter the contract rate (default example 1.2%).
Fees typically apply for 3 years (1,095 days) from disbursement.
Prepayment fee
200,000원
The shorter the remaining term, the smaller the fee.
Calculate loan interest for this amount →What is a prepayment fee?
A prepayment fee is charged by a lender when a loan is repaid earlier than its scheduled maturity, to offset part of the lender's lost interest income. It usually applies only within a set period (often 3 years) after disbursement.
How it's calculated
Fee = prepaid principal × fee rate × (remaining days ÷ total period days)
Notes
Why do lenders charge a prepayment fee?
When a lender disburses a loan, it funds that money (via deposits, bonds, etc.) expecting to earn interest over the loan's term. If a borrower repays early, the lender loses the interest income it planned for the remaining term, and also incurs costs re-lending or redeploying the recovered funds. The prepayment fee offsets part of that lost income and cost.
This is also why the fee is proportional to remaining days ÷ total period days: right after disbursement, more of the planned interest period remains, so the potential loss is larger; near maturity, less time remains, so the loss shrinks. Using the calculator's defaults (50M principal, 1.2% rate, 365 remaining days, 1,095 total days): ratio = 365 ÷ 1,095 = 1/3, fee = 50M × 1.2% × 1/3 = 200,000 KRW, and the effective burden rate is 200,000 ÷ 50M × 100 = 0.40% — matching the result above exactly. As remaining days approach zero, the ratio approaches zero and the fee effectively disappears.
With the same formula, 730 remaining days (two-thirds of the 1,095-day period): fee = 50M × 1.2% × 2/3 = 400,000 KRW, an effective burden rate of 0.80% — exactly double the 365-day example. The fee scales linearly with remaining time. The ratio is capped at 1 (100%) in the calculation logic, so the fee never exceeds "prepaid principal × fee rate."
When considering refinancing into a lower-rate loan, always compare the interest savings against the prepayment fee. If the fee exceeds the savings, refinancing could actually cost more overall — calculate both figures side by side before deciding.
How the fee is structured, and when it is waived
The fee is not a flat charge. It tapers as the remaining term shortens, so repaying the same amount at a different time can cost very differently.
It tapers with the remaining term
The usual formula multiplies the prepaid principal by a fee rate, then by the share of the fee period still remaining. With a three-year period, repaying after one year carries two years' worth; after two and a half, only six months'.
The charge is therefore highest immediately after drawdown and falls sharply as the waiver date approaches — worth calculating before refinancing.
Rates vary by product and lender, typically higher for mortgages than unsecured loans and for fixed-rate than variable products. The loan agreement states the figure.
Most fees lapse after three years
Bank loans generally waive the fee three years after drawdown. This is convention rather than statute, but is usually written into the terms.
Policy loans and special-purpose products may set different periods, so check the product disclosure.
Refinancing as the three years approach can cut the rate without a fee — bearing in mind that the new loan starts its own fee period.
Repayments that carry no fee
- Partial repayments within an allowance. Many products permit repaying a set share of principal each year without charge.
- Refinancing within the same bank, where fees are often waived or reduced.
- Repayment on sale of the security. Some products waive the fee when the property is sold, though not automatically.
- Requesting a rate reduction instead. Improved creditworthiness can justify a lower rate without refinancing, and so without any fee.
Legal basis
- Basis for the fee — each lender's loan agreement
- Review of unfair terms — Act on the Regulation of Terms and Conditions art. 6
- Right to request a rate reduction — Banking Act art. 30-2