A Guide for Calculating the Early Payment Amount

Saudi Arabian Monetary Authority
Guide for Calculating the Early Payment Amount 1065/6341 Dhu al-Qi'dah / August

The Authority assumes no responsibility for the accuracy or content of this guide. To achieve the highest level of quality, maximum efforts have been made. For more information, please refer to the relevant page. The Authority is not liable for any effects related to its use.

Table of Contents

2. Introduction
1. Early Payment
3. Key Conditions for Calculating the Early Payment Amount
4. Examples of Calculating the Early Payment Amount
Example (1): Personal Financing Early Payment Calculation Method Example (2): Vehicle Finance Lease Early Payment Calculation Method Example (3): Real Estate Financing Early Payment Calculation Method Example (4): Personal Financing Early Payment Calculation Method
12. Frequently Asked Questions

Introduction

The Authority attaches great importance to protecting the rights of beneficiaries, enhancing transparency and disclosure principles within the implementation of technical standards, and raising the level of transparency and disclosure in financial products to match international best practices. Early payment rights for beneficiaries of various financing products in the sector are considered a right. Accordingly, the Authority has obligated financing providers (financing companies/banks) to use a unified method to calculate the early payment amount for financing contracts with monthly installments, such as personal financing. This is aimed at enabling beneficiaries to know their rights.

This guide was prepared to provide a clear explanation and method for calculating the early payment amount, in accordance with Articles (22) and (24) of the Executive Regulations of the System for Monitoring Financing Companies, issued on 11 Rabee' Al-Akhir 1434H (corresponding to February 2013), and Articles (9) and (11) of the Executive Regulations of the Leasing System, issued on 11 Rabee' Al-Akhir 1434H (corresponding to February 2013). It also incorporates the first update to the Consumer Financing Rules, Articles (9) and (11), issued on 14 Ramadan 1431H (corresponding to July 2010).

Early Payment

The financing systems and their executive regulations and rules guarantee consumer financing beneficiaries the right to accelerate the repayment of the remaining financing amount at any time, except during the prohibition period. This is subject to the contract stating that the prohibition period does not exceed two years from the contract signing date. In this case, the beneficiary bears the cost for the remaining period without obtaining financing from another source. The compensation to the beneficiary is as follows:

a. The investment recovery cost does not exceed the cost for the next three months of repayment, calculated on a declining balance basis.

b. The amount paid by the financing party due to the third party to the financing contract according to the following conditions:

1. The third party has paid compensation to the beneficiary.
2. These payments are documented in the financing file.
3. There is no possibility of recovering these payments from the third party.
4. The calculation is based on the remaining period of the financing contract.

Key Conditions for Calculating the Early Payment Amount

1. The declining balance method is used to distribute the cost for the remaining period over the due period, such that the cost for the remaining period is distributed proportionally among the installments based on the value of the remaining financing amount at the beginning of the period entitled to it.

2. An Amortization Table must be provided, showing the payment amount, which includes the principal amount, the profit amount, and the cost for the remaining period for each installment, after each payment reduces the financing amount.

3. When the beneficiary wishes to pay off the financing amount in full early, in addition to the remaining balance, the cost for the next three months of repayment is calculated on a declining balance basis.

Examples of Calculating the Early Payment Amount

Example (1): Personal Financing Early Payment Calculation Method

A personal financing agreement is to be repaid in monthly installments of 50,000 SAR, with each installment valued at 4,244 SAR, for a duration of 12 months.

Financing Data

In the event of the client's desire to pay early, the number of remaining installments was 6, and the total cost for the remaining months of financing was 25,212.74 SAR. The cost for the next three months of early repayment is 179.27 SAR.

Early Payment Calculation Method

Early Payment Amount = 25,212.74 + 179.27 = 25,392 SAR (Total of Highlighted Amounts)

Month	Beginning Balance	Monthly Installment	Cost for Remaining Period	Principal Amount	Ending Balance
1	50,000.00	4,244	142.03	4,101.97	45,898.03
2	45,898.03	4,244	130.38	4,113.62	41,784.41
3	41,784.41	4,244	118.69	4,125.31	37,659.10
4	37,659.10	4,244	106.97	4,137.03	33,522.08
5	33,522.08	4,244	95.22	4,148.78	29,373.30
6	29,373.30	4,244	83.44	4,160.56	25,212.74
7	25,212.74	4,244	71.62	4,172.38	21,040.36
8	21,040.36	4,244	59.77	4,184.23	16,856.13
9	16,856.13	4,244	47.88	4,196.12	12,660.01
10	12,660.01	4,244	35.96	4,208.04	8,451.97
11	8,451.97	4,244	24.01	4,219.99	4,231.98
12	4,231.98	4,244	12.02	4,231.98	0.00

Example (2): Vehicle Finance Lease Early Payment Calculation Method

A vehicle finance lease agreement is to be repaid in monthly installments of 150,000 SAR, with each installment valued at 2,300 SAR, for a duration of 60 months. An initial down payment of 30,000 SAR is made, and administrative fees of 1,000 SAR are paid after contract signing.

Financing Data

In the event of the client's desire to pay early, the number of remaining installments was 24, and the total cost for the remaining months of financing was 52,084.08 SAR. The cost for the next three months of early repayment is 705.58 SAR.

Early Payment Calculation Method

Early Payment Amount = 52,084.08 + 705.58 = 52,789.66 SAR (Total of Highlighted Amounts)

Month	Beginning Balance	Monthly Installment	Rent Value	Principal Amount	Ownership Right Value	Ending Balance
1	120,000	2,300	564.18	1,735.82		118,264.18
2	118,264.18	2,300	556.02	1,743.98		116,520.19
3	116,520.19	2,300	547.82	1,752.18		114,768.01
4	114,768.01	2,300	539.58	1,760.42		113,007.59
5	113,007.59	2,300	531.30	1,768.70		111,238.89
6	111,238.89	2,300	522.99	1,777.01		109,461.88
7	109,461.88	2,300	514.63	1,785.37		107,676.51
8	107,676.51	2,300	506.24	1,793.76		105,882.75
9	105,882.75	2,300	497.80	1,802.20		104,080.55
10	104,080.55	2,300	489.33	1,810.67		102,269.88
11	102,269.88	2,300	480.82	1,819.18		100,450.70
12	100,450.70	2,300	472.27	1,827.73		98,622.97
13	98,622.97	2,300	463.67	1,836.33		96,786.64
14	96,786.64	2,300	455.04	1,844.96		94,941.68
15	94,941.68	2,300	446.37	1,853.63		93,088.05
16	93,088.05	2,300	437.65	1,862.35		91,225.70
17	91,225.70	2,300	428.90	1,871.10		89,354.59
18	89,354.59	2,300	420.10	1,879.90		87,474.69
19	87,474.69	2,300	411.26	1,888.74		85,585.95
20	85,585.95	2,300	402.38	1,897.62		83,688.33
21	83,688.33	2,300	393.46	1,906.54		81,781.79
22	81,781.79	2,300	384.49	1,915.51		79,866.29
23	79,866.29	2,300	375.49	1,924.51		77,941.78
24	77,941.78	2,300	366.44	1,933.56		76,008.22
25	76,008.22	2,300	357.35	1,942.65		74,065.57
26	74,065.57	2,300	348.22	1,951.78		72,113.78
27	72,113.78	2,300	339.04	1,960.96		70,152.83
28	70,152.83	2,300	329.82	1,970.18		68,182.65
29	68,182.65	2,300	320.56	1,979.44		66,203.21
30	66,203.21	2,300	311.25	1,988.75		64,214.46
31	64,214.46	2,300	301.90	1,998.10		62,216.36
32	62,216.36	2,300	292.51	2,007.49		60,208.87
33	60,208.87	2,300	283.07	2,016.93		58,191.94
34	58,191.94	2,300	273.59	2,026.41		56,165.53
35	56,165.53	2,300	264.06	2,035.94		54,129.59
36	54,129.59	2,300	254.49	2,045.51		52,084.08
37	52,084.08	2,300	244.87	2,055.13		50,028.95
38	50,028.95	2,300	235.21	2,064.79		47,964.16
39	47,964.16	2,300	225.50	2,074.50		45,889.66
40	45,889.66	2,300	215.75	2,084.25		43,805.41
41	43,805.41	2,300	205.95	2,094.05		41,711.36
42	41,711.36	2,300	196.10	2,103.90		39,607.47
43	39,607.47	2,300	186.21	2,113.79		37,493.68
44	37,493.68	2,300	176.28	2,123.72		35,369.95
45	35,369.95	2,300	166.29	2,133.71		33,236.25
46	33,236.25	2,300	156.26	2,143.74		31,092.50
47	31,092.50	2,300	146.18	2,153.82		28,938.69
48	28,938.69	2,300	136.05	2,163.95		26,774.74
49	26,774.74	2,300	125.88	2,174.12		24,600.62
50	24,600.62	2,300	115.66	2,184.34		22,416.28
51	22,416.28	2,300	105.39	2,194.61		20,221.67
52	20,221.67	2,300	95.07	2,204.93		18,016.74
53	18,016.74	2,300	84.71	2,215.29		15,801.45
54	15,801.45	2,300	74.29	2,225.71		13,575.74
55	13,575.74	2,300	63.83	2,236.17		11,339.56
56	11,339.56	2,300	53.31	2,246.69		9,092.87
57	9,092.87	2,300	42.75	2,257.25		6,835.62
58	6,835.62	2,300	32.14	2,267.86		4,567.76
59	4,567.76	2,300	21.48	2,278.52		2,289.24
60	2,289.24	2,300	10.76	2,289.24		0.00

Example (3): Real Estate Financing Early Payment Calculation Method

A real estate financing agreement is to be repaid in monthly installments of 1,000,000 SAR, with each installment valued at 4,510 SAR, for a duration of 300 months. An initial down payment of 300,000 SAR is made, and administrative fees of 5,000 SAR are paid after contract signing.

Financing Data

In the event of the client's desire to pay early, the number of remaining installments was 120, and the total cost for the remaining months of financing was 406,235.99 SAR. The cost for the next three months of early repayment is 6,056.03 SAR.

Early Payment Calculation Method

Early Payment Amount = 406,235.99 + 6,056.03 = 412,292.02 SAR (Total of Highlighted Amounts)

Month	Beginning Balance	Monthly Installment	Cost for Remaining Period	Principal Amount	Month	Beginning Balance	Monthly Installment	Cost for Remaining Period	Principal Amount
1	700,000.00	4,510	3,099.11	1,410.89	31	663,930.01	4,510	3,066.13	1,443.87
2	698,589.11	4,510	3,090.10	1,419.90	32	662,486.14	4,510	3,057.43	1,452.57
3	697,169.21	4,510	3,081.33	1,428.67	33	661,028.71	4,510	3,048.74	1,461.26
4	695,739.54	4,510	3,072.63	1,437.37	34	659,557.45	4,510	3,040.06	1,469.94
5	694,299.91	4,510	3,063.96	1,446.04	35	658,072.39	4,510	3,031.39	1,478.61
6	692,850.35	4,510	3,055.30	1,454.70	36	656,573.00	4,510	3,022.73	1,487.27
7	691,390.65	4,510	3,046.63	1,463.37	37	655,059.27	4,510	3,014.09	1,495.91
8	689,920.78	4,510	3,037.96	1,472.04	38	653,531.18	4,510	3,005.46	1,504.54
9	688,440.42	4,510	3,029.30	1,480.70	39	651,988.72	4,510	2,996.84	1,513.16
10	686,949.72	4,510	3,020.63	1,489.37	40	650,431.88	4,510	2,988.23	1,521.77
11	685,449.09	4,510	3,011.96	1,498.04	41	648,860.65	4,510	2,979.64	1,530.36
12	683,937.13	4,510	3,003.30	1,506.70	42	647,275.01	4,510	2,971.06	1,538.94
13	682,413.83	4,510	2,994.63	1,515.37	43	645,674.95	4,510	2,962.49	1,547.51
14	680,879.20	4,510	2,985.96	1,524.04	44	644,060.46	4,510	2,953.93	1,556.07
15	679,333.24	4,510	2,977.30	1,532.70	45	642,431.53	4,510	2,945.38	1,564.62
16	677,775.94	4,510	2,968.63	1,541.37	46	640,788.15	4,510	2,936.84	1,573.16
17	676,207.31	4,510	2,959.96	1,550.04	47	639,130.31	4,510	2,928.31	1,581.69
18	674,627.35	4,510	2,951.30	1,558.70	48	637,457.00	4,510	2,919.79	1,590.21
19	673,036.05	4,510	2,942.63	1,567.37	49	635,768.21	4,510	2,911.28	1,598.72
20	671,433.42	4,510	2,933.96	1,576.04	50	634,063.93	4,510	2,902.78	1,607.22
21	669,819.46	4,510	2,925.30	1,584.70	51	632,344.15	4,510	2,894.29	1,615.71
22	668,194.16	4,510	2,916.63	1,593.37	52	630,608.86	4,510	2,885.81	1,624.19
23	666,557.53	4,510	2,907.96	1,602.04	53	628,858.05	4,510	2,877.34	1,632.66
24	664,909.57	4,510	2,899.30	1,610.70	54	627,091.71	4,510	2,868.88	1,641.12
25	663,250.27	4,510	2,890.63	1,619.37	55	625,309.83	4,510	2,860.43	1,649.57
26	661,579.64	4,510	2,881.96	1,628.04	56	623,512.40	4,510	2,851.99	1,658.01
27	659,897.68	4,510	2,873.30	1,636.70	57	621,699.41	4,510	2,843.56	1,666.44
28	658,204.38	4,510	2,864.63	1,645.37	58	619,870.85	4,510	2,835.14	1,674.86
29	656,500.05	4,510	2,855.96	1,654.04	59	618,026.71	4,510	2,826.73	1,683.27
30	654,784.09	4,510	2,847.30	1,662.70	60	616,166.98	4,510	2,818.33	1,691.67
61	614,291.65	4,510	2,809.94	1,700.06	91	583,666.50	4,510	2,666.50	1,843.50
62	612,401.71	4,510	2,801.56	1,708.44	92	581,800.00	4,510	2,658.16	1,851.84
63	610,496.15	4,510	2,793.18	1,716.82	93	579,928.16	4,510	2,649.84	1,860.16
64	608,574.97	4,510	2,784.80	1,725.20	94	578,050.32	4,510	2,641.53	1,868.47
65	606,638.17	4,510	2,776.42	1,733.58	95	576,166.49	4,510	2,633.23	1,876.77
66	604,685.75	4,510	2,768.04	1,741.96	96	574,276.66	4,510	2,624.95	1,885.05
67	602,717.71	4,510	2,759.66	1,750.34	97	572,380.71	4,510	2,616.68	1,893.32
68	600,734.05	4,510	2,751.28	1,758.72	98	570,478.63	4,510	2,608.42	1,901.58
69	598,734.77	4,510	2,742.90	1,767.10	99	568,570.31	4,510	2,600.18	1,909.82
70	596,719.87	4,510	2,734.52	1,775.48	100	566,655.69	4,510	2,591.95	1,918.05
101	564,734.74	4,510	2,583.73	1,926.27	131	523,666.50	4,510	2,393.50	2,116.50
102	562,807.01	4,510	2,575.52	1,934.48	132	521,550.00	4,510	2,385.20	2,124.80
103	560,871.49	4,510	2,567.32	1,942.68	133	519,423.50	4,510	2,376.90	2,133.10
104	558,928.17	4,510	2,559.12	1,950.88	134	517,286.60	4,510	2,368.62	2,141.38
105	556,977.05	4,510	2,550.92	1,959.08	135	515,139.30	4,510	2,360.35	2,149.65
106	555,018.13	4,510	2,542.72	1,967.28	136	512,981.55	4,510	2,352.09	2,157.91
107	553,051.41	4,510	2,534.52	1,975.48	137	510,813.30	4,510	2,343.84	2,166.16
108	551,076.89	4,510	2,526.32	1,983.68	138	508,634.46	4,510	2,335.60	2,174.40
109	549,094.57	4,510	2,518.12	1,991.88	139	506,444.96	4,510	2,327.37	2,182.63
110	547,104.45	4,510	2,509.92	2,000.08	140	504,244.79	4,510	2,319.15	2,190.85
141	502,033.84	4,510	2,310.94	2,199.06	171	456,666.50	4,510	2,083.50	2,426.50
142	499,812.90	4,510	2,302.74	2,207.26	172	454,240.00	4,510	2,075.20	2,434.80
143	497,580.16	4,510	2,294.54	2,215.46	173	451,803.50	4,510	2,066.90	2,443.10
144	495,335.62	4,510	2,286.34	2,223.66	174	449,356.60	4,510	2,058.62	2,451.38
145	493,079.28	4,510	2,278.14	2,231.86	175	446,899.30	4,510	2,050.35	2,459.65
146	490,811.14	4,510	2,269.94	2,240.06	176	444,431.55	4,510	2,042.09	2,467.91
147	488,531.20	4,510	2,261.74	2,248.26	177	441,953.30	4,510	2,033.84	2,476.16
148	486,239.46	4,510	2,253.54	2,256.46	178	439,464.46	4,510	2,025.60	2,484.40
149	483,935.92	4,510	2,245.34	2,264.66	179	436,964.96	4,510	2,017.37	2,492.63
150	481,620.58	4,510	2,237.14	2,272.86	180	434,454.79	4,510	2,009.15	2,500.85
181	431,933.84	4,510	2,000.94	2,509.06	211	376,666.50	4,510	1,723.50	2,786.50
182	429,402.90	4,510	1,992.74	2,517.26	212	373,940.00	4,510	1,715.20	2,794.80
183	426,860.16	4,510	1,984.54	2,525.46	213	371,203.50	4,510	1,706.90	2,803.10
184	424,305.62	4,510	1,976.34	2,533.66	214	368,456.60	4,510	1,698.62	2,811.38
185	421,739.28	4,510	1,968.14	2,541.86	215	365,699.30	4,510	1,690.35	2,819.65
186	419,161.14	4,510	1,959.94	2,550.06	216	362,931.55	4,510	1,682.09	2,827.91
187	416,571.20	4,510	1,951.74	2,558.26	217	360,153.30	4,510	1,673.84	2,836.16
188	413,969.46	4,510	1,943.54	2,566.46	218	357,364.46	4,510	1,665.60	2,844.40
189	411,355.92	4,510	1,935.34	2,574.66	219	354,564.96	4,510	1,657.37	2,852.63
190	408,730.58	4,510	1,927.14	2,582.86	220	351,754.79	4,510	1,649.15	2,860.85
221	348,933.84	4,510	1,640.94	2,869.06	251	286,666.50	4,510	1,313.50	3,196.50
222	346,102.90	4,510	1,632.74	2,877.26	252	283,450.00	4,510	1,305.20	3,204.80
223	343,260.16	4,510	1,624.54	2,885.46	253	280,223.50	4,510	1,296.90	3,213.10
224	340,405.62	4,510	1,616.34	2,893.66	254	276,986.60	4,510	1,288.62	3,221.38
225	337,539.28	4,510	1,608.14	2,901.86	255	273,739.30	4,510	1,280.35	3,229.65
226	334,661.14	4,510	1,599.94	2,910.06	256	270,481.55	4,510	1,272.09	3,237.91
227	331,771.20	4,510	1,591.74	2,918.26	257	267,213.30	4,510	1,263.84	3,246.16
228	328,869.46	4,510	1,583.54	2,926.46	258	263,934.46	4,510	1,255.60	3,254.40
229	325,955.92	4,510	1,575.34	2,934.66	259	260,644.96	4,510	1,247.37	3,262.63
230	323,030.58	4,510	1,567.14	2,942.86	260	257,344.79	4,510	1,239.15	3,270.85
261	254,033.84	4,510	1,230.94	3,279.06	291	186,666.50	4,510	853.50	3,656.50
262	250,712.90	4,510	1,222.74	3,287.26	292	183,150.00	4,510	845.20	3,664.80
263	247,380.16	4,510	1,214.54	3,295.46	293	179,623.50	4,510	836.90	3,673.10
264	244,035.62	4,510	1,206.34	3,303.66	294	176,086.60	4,510	828.62	3,681.38
265	240,679.28	4,510	1,198.14	3,311.86	295	172,539.30	4,510	820.35	3,689.65
266	237,311.14	4,510	1,189.94	3,320.06	296	168,981.55	4,510	812.09	3,697.91
267	233,931.20	4,510	1,181.74	3,328.26	297	165,413.30	4,510	803.84	3,706.16
268	230,539.46	4,510	1,173.54	3,336.46	298	161,834.46	4,510	795.60	3,714.40
269	227,135.92	4,510	1,165.34	3,344.66	299	158,244.96	4,510	787.37	3,722.63
270	223,720.58	4,510	1,157.14	3,352.86	300	154,644.79	4,510	779.15	3,730.85
301	151,033.84	4,510	770.94	3,739.06

Example (4): Personal Financing Early Payment Calculation Method

A personal financing agreement is to be repaid in monthly installments of 100,000 SAR, with each installment valued at 4,450 SAR, for a duration of 24 months. Administrative fees of 1,000 SAR are paid after contract signing, and the first installment is due 20 days after the contract signing date.

Financing Data

In the event of the client's desire to pay early, the number of remaining installments was 11, and the total cost for the remaining months of financing was 47,376.41 SAR. The cost for the next three months of early repayment is 711.7 SAR.

Early Payment Calculation Method

Early Payment Amount = 47,376.41 + 710.6 = 48,087.01 SAR (Total of Highlighted Amounts)

Month	Beginning Balance	Monthly Installment	Cost for Remaining Period	Principal Amount	Ending Balance
20	100,000.00	4,450	359.75	4,090.25	95,909.75
2	95,909.75	4,450	526.14	3,923.86	91,985.89
3	91,985.89	4,450	504.61	3,945.39	88,040.50
4	88,040.50	4,450	482.97	3,967.03	84,073.47
5	84,073.47	4,450	461.21	3,988.79	80,084.67
6	80,084.67	4,450	439.32	4,010.68	76,074.00
7	76,074.00	4,450	417.32	4,032.68	72,041.32
8	72,041.32	4,450	395.20	4,054.80	67,986.52
9	67,986.52	4,450	372.96	4,077.04	63,909.47
10	63,909.47	4,450	350.59	4,099.41	59,810.07
11	59,810.07	4,450	328.10	4,121.90	55,688.17
12	55,688.17	4,450	305.49	4,144.51	51,543.6

11/11

5. Does a certain period need to elapse to allow early repayment? A financing contract may stipulate a period during which early repayment is prohibited, provided that this prohibition period does not exceed two years from the date of signing the financing contract. This applies as long as the subject of the contract is real estate.

1. Can the financing entity refuse early repayment of the remaining amount of the financing? The financing entity cannot refuse early repayment of the remaining amount of the financing in such a case, but it may stipulate in the financing contract a period during which early repayment is prohibited, provided that this period does not exceed two years from the date of signing the financing contract.

7. What are the compensations that the financing entity may obtain in case of early repayment of the remaining amount of the financing? The financing entity is entitled to obtain compensation from the beneficiary in case of early repayment, as follows:

1. The cost of reinvestment, provided it does not exceed the cost for the next three months, calculated on a declining balance basis.

2. Expenses paid by the financing entity to a third party due to the financing contract, according to the following conditions:
a. The beneficiary compensates the financing entity if the third party has not paid. b. These payments are documented in the financing file.
c. There is no possibility of recovering these payments from the third party.
d. It is calculated based on the remaining duration of the financing contract.