Business Loan Refinance Break-Even

How to use it

Enter what you owe and pay now, the early repayment fee, and the new loan on offer. Both loans are run month by month to find the month the switch has paid for itself and the total saved or lost by the end.

Where the number comes from

• Both payments use the standard amortisation formula: the current one on the balance over the months remaining, the new one over the new term.
• The cost of switching is the early repayment fee on the balance plus the new fees. Paid up front, it counts against you from day one; borrowed, it is added to the new loan and repaid with interest.
• Each month, your position is the payments saved so far, minus anything paid up front, plus the difference between what you still owe on the old loan and the new one.
• Break-even is the first month that position is zero or better. Counting balances keeps the comparison honest when fees are borrowed or the terms differ.
• The lifetime saving is everything you would pay on the current loan minus everything you pay on the new one, including costs.

What goes wrong

The part most calculators leave out.

• Time value is ignored. A saving that arrives in year four is worth less than fees paid today, so a long break-even is weaker than it looks.
• Fixed rates are assumed for both loans. A variable new rate can erode the saving after the switch, while the costs are already sunk.
• Early repayment fees often step down over time or are calculated differently — a percentage of the amount repaid, or months of interest. Use the figure from your agreement, not a typical one.
• Terms that come with the new loan — security, personal guarantees, covenants, prepayment penalties of its own — are a real cost this arithmetic cannot see.
• Comparing payments when terms differ misleads. A longer term almost always lowers the payment and almost always raises the total.

Questions

Why not just divide the fees by the monthly saving?

That works only when both loans have the same balance and term. Once fees are borrowed or the term changes, the payments stop being comparable, so this calculator also counts the difference in what you still owe.

Should I borrow the switching costs?

It saves cash today, but the costs then accrue interest for the whole term. The note under the results shows what borrowing them actually costs.

What if break-even comes after my current loan would have ended?

Then the switch does not pay: you would have finished repaying the old loan before the savings covered the cost of leaving it.

Does anything I type get sent anywhere?

No. The whole calculation runs in your browser. Nothing is sent to us or logged, and there is no account to create. Your browser keeps the figures with this tab’s history so that Back and Reload bring them back, and Reset clears them.