You want to pay off a loan early or switch to a lower rate — but you hesitate because you don't know the prepayment penalty (중도상환수수료). Enter your prepaid principal, fee rate and time elapsed below for an instant estimate.
1. What it comes to. The formula is prepaid principal × fee rate × (remaining ÷ charging period) — so the further in you are, the smaller it gets. If three years have passed since drawdown it is usually zero; check that first.
2. What people miss. Rates more than halved for loans taken from 13 January 2025 — on variable-rate bank mortgages, 1.25% down to 0.55%. But loans taken before that keep their original terms, so the number that governs you is in your own loan agreement.
3. How to use it. Weigh the fee against the extra interest you would pay by not repaying — the break-even usually lands in days, not months.
| Prepaid principal | 0 |
| Fee rate | 0% |
| Fee period | 0 mo |
| Elapsed | 0 mo |
| Remaining period − elapsed | 0 mo |
| Estimated penalty | 0 |
Formula: principal × rate × (remaining ÷ fee period). After the fee period (usually 3 years) it's 0 (waived). Check your exact rate and terms in your loan contract or bank app. This is an estimate.
What is a prepayment penalty?
A prepayment penalty is a fee the bank charges when you repay a loan earlier than agreed — compensation for the interest income and handling costs it loses. Two things matter most: it's usually waived after the fee period (typically 3 years), and while charged, it shrinks in proportion to the time left.
The formula
| Item | Detail |
|---|---|
| Formula | principal × fee rate × (remaining ÷ fee period) |
| Fee period | usually 3 years from the loan start (0 after that) |
| Remaining | fee period − time elapsed (more elapsed = smaller fee) |
Example: repaying ₩100 million at a 1.2% rate, 3-year fee period, 1 year (12 months) in: ₩100M × 1.2% × (24 ÷ 36) = ₩800,000. It shrinks over time:
| Elapsed | Remaining | Penalty (₩100M · 1.2% · 3yr) |
|---|---|---|
| 6 months | 30 mo | ₩1,000,000 |
| 1 year | 24 mo | ₩800,000 |
| 2 years | 12 mo | ₩400,000 |
| 2.5 years | 6 mo | ₩200,000 |
| 3+ years | 0 mo | ₩0 (waived) |
Typical rates by loan type (reference)
It varies by bank and product, but roughly, for the major Korean banks. Your exact rate is in your contract.
| Loan type | Fixed rate | Variable rate |
|---|---|---|
| Mortgage | ~1.4% | ~1.2% |
| Personal credit loan | ~0.7–0.8% | ~0.6–0.7% |
Falling since 2025. From mid-January 2025, prepayment penalties in Korea were reformed to an “actual-cost basis” — banks may charge only within their real losses and administrative costs. Rates are trending down, so it's worth re-checking the current rate even on an existing loan.
The January 2025 cut — but not the same cut for everyone
Korea's financial regulator reset prepayment fee rates for loans taken out from 13 January 2025. Every headline said “fees are down.” Put the before-and-after side by side and the picture is far less even.
| Lender & loan type | Before | After | Cut (our calculation) |
|---|---|---|---|
| Bank mortgage (fixed) | 1.43% | 0.56% | −61% |
| Bank mortgage (variable) | 1.25% | 0.55% | −56% |
| Bank credit loan (variable) | 0.83% | 0.11% | −87% |
| Savings-bank mortgage (fixed) | 1.64% | 1.24% | −24% |
| Savings-bank credit (variable) | 1.64% | 1.33% | −19% |
So “the fee was cut” is the wrong summary. Where you borrowed decided how much.
Before the reform a savings-bank credit loan cost about twice a bank credit loan (1.64% against 0.83%). After it, about twelve times (1.33% against 0.11%) — our calculation.
The announcement does not explain why the gap widened, and we did not guess.
Two things this does not mean. ① It applies to loans taken out from 13 January 2025. An older loan keeps its contracted rate. ② These are reference averages — your contract governs. Check yours on the FSS product comparison or with your lender.
Draw that table as a line and it is not a staircase but a straight slope.
When it's waived
- Fee period (usually 3 years) has passed — most loans waive it after 3 years. Check this date before repaying.
- Within an annual free-prepayment allowance — some banks let you repay up to a limit (e.g., 10% of principal per year) with no fee.
- Re-contract or promotional products at the same bank may waive or reduce it.
For the strategy of paying down principal, see loan payoff vs. saving/investing; for switching to a lower rate, see when refinancing pays off.
A worked case: a three-year fee window, weighing a switch
Say you borrowed 100 million won on a variable rate two years ago — before the January 2025 reform — at a fee rate of 1.25%, and you are now weighing a switch to a loan 0.5pp cheaper. ① Put 100 million, 1.25%, three years and 24 months elapsed into the calculator and the fee comes to ₩416,667. ② A 0.5pp cut on 100 million saves 500,000 won a year, or ₩41,667 a month. ③ So the fee is recovered in 10 months — if more than that is left on the loan, switching wins. ④ A new loan does carry its own costs, stamp duty among them. The same arithmetic applied to repaying from savings, and the day it tips, is in the prepayment fee break-even; the procedure is in the refinancing guide, and total interest in the loan calculator.
Show the rates themselves rather than the percentage cut, and the gap tells its own story.
Pre-repayment checklist
- ☐ Confirm your exact fee rate (contract or bank app)
- ☐ Check the fee period and loan start date → has 3 years passed?
- ☐ Check for an annual free-repayment allowance
- ☐ Refinancing? Compare penalty vs. interest saved (guide)
- ☐ Spare cash? Compare loan rate vs. deposit/investment return (guide)
Questions that remain
Is it really free after 3 years?
Most loans charge no prepayment penalty once the fee period (usually 3 years) has passed. Periods can vary by product, so check your contract — especially if you're within days of that date.
Does a partial repayment incur a fee?
Yes, on the portion repaid. But some banks waive it up to an annual allowance (e.g., 10% of principal), so it's worth checking.
Why does the bank's charge differ from this calculator?
Banks compute by exact days, and fee-period, rate, and allowance rules differ by product. This is a monthly estimate — use it as a guide and confirm the exact figure with your bank.
Two keys to the prepayment penalty: has the fee period (usually 3 years) passed, and it shrinks with the time remaining. Check your loan start date and rate before repaying, and you won't lose out.
Sources
- Financial Services Commission — announcement on the prepayment fee reform (checked July 2026). Source for the 13 January 2025 effective date and the before-and-after rates by lender and loan type.
- Financial Supervisory Service — mortgage product comparison (checked July 2026). Where you can check the rate a specific lender actually applies.
- Our own calculation. The percentage cuts (−61%, −56%, −87%, −24%, −19%) and the widening gap between banks and savings banks (about 2× to about 12×) are values we computed from the published rates, not figures in the announcement.
Where to check further
- The rate that actually applies to you. The figures here are sector averages published by the FSC, not any one lender's terms — and loans taken before 13 January 2025 keep their original conditions. Your loan agreement is what governs, so read the prepayment clause there.
- How your bank counts the remaining period — by day or by month. Not confirmed, and it is the most common reason a bank's figure differs from this calculator. Ask for the exact amount in writing before repaying.
- Product-specific waivers. The general waiver cases are listed above, but individual products carry their own and those were not verified. Your lender can confirm whether any waiver applies to your case — worth asking, since it can take the fee to zero.
As of July 2026. The rates and the effective date come from the FSC announcement; the percentage cuts are ours. This calculator gives an estimate from the standard formula — the actual fee depends on your bank, product and contract. Confirm the exact amount and any waiver with your lender before you repay.
