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Loan Refinance Benefit Calculator

Check if refinancing your loan can save you money after accounting for all charges.

Calculate Your Loan Refinance Benefit

Current Loan Details

New Loan Details

Refinance Costs

Enter your loan details and click calculate to see your refinance savings.

This calculator provides estimates only. Actual savings may vary based on lender policies.

Loan refinancing, also known as a balance transfer, involves taking a new loan to pay off an existing one, usually to take advantage of lower interest rates or better repayment terms. Whether you have a personal loan, home loan, or loan against property, refinancing can potentially save you a significant amount of money in interest payments.

However, a lower interest rate doesn't automatically mean you save money. You must consider the "cost of switching," which includes foreclosure charges on your current loan and processing fees for the new loan. Sometimes, these costs can exceed the interest savings.

Our Loan Refinance Benefit Calculator helps you do the math accurately. By inputting your current loan details and the new offer, you can see exactly how much you will save (or lose) by making the switch, helping you make an informed financial decision.

How Loan Refinance Benefit Is Calculated

The calculation involves comparing the future cash outflows of your current loan versus the new loan.

  • Step 1: We calculate the remaining interest you would pay on your current loan if you continue with it.
  • Step 2: We calculate the total interest you would pay on the new loan for the given tenure.
  • Step 3: We deduct the one-time costs: Foreclosure charges (paid to close the old loan) and Processing fees (paid to open the new loan).
  • Step 4: The result is your Net Financial Benefit. If positive, you save money. If negative, refinancing costs you more.

When Does Refinancing Make Sense?

Refinancing is typically a good idea when:

  • Interest rates in the market have dropped significantly since you took your loan.
  • Your credit score has improved, making you eligible for better rates.
  • You want to reduce your monthly EMI burden (though this might increase total interest).
  • You are in the early stages of your loan tenure (when the interest component of EMI is highest).

Things to Consider Before Refinancing

Before you switch, keep an eye on:

  • Remaining Tenure: If you are near the end of your loan, refinancing rarely makes sense as you've already paid most of the interest.
  • Hidden Costs: Ensure there are no other hidden charges like legal fees or valuation fees.
  • Terms & Conditions: Read the fine print of the new loan agreement carefully.

Frequently Asked Questions

Is refinancing always beneficial?toggleIcon
Not always. Refinancing is beneficial only if the interest savings from the new loan outweigh the costs associated with closing your current loan (foreclosure charges) and processing the new one.
Do foreclosure charges reduce savings?toggleIcon
Yes, foreclosure charges are a significant cost when refinancing. They are usually a percentage of your outstanding principal. If these charges are high, they can eat into your interest savings, making refinancing less attractive.
Can EMI increase after refinancing?toggleIcon
Typically, the goal is to reduce EMI. However, if you choose a much shorter tenure to pay off the loan faster, your EMI might increase even if the interest rate is lower. Conversely, extending the tenure can lower EMI but increase total interest cost.
How much interest rate reduction is worth refinancing?toggleIcon
A general rule of thumb is that a reduction of 0.50% to 1.00% or more can be worthwhile, but you must calculate the exact numbers including all fees to be sure.
Does longer tenure reduce savings?toggleIcon
Extending your tenure will reduce your monthly EMI but will likely increase the total interest you pay over the life of the loan. For maximum savings, try to keep the tenure same or shorter if you can afford the EMI.