1. What is the Loan Full Settlement Calculation?

The loan full settlement calculation determines the remaining balance to pay off a loan after a certain number of payments have been made. It accounts for both principal and interest components of the loan.

2. How Does the Calculator Work?

The calculator uses the full settlement formula:

Where:

• \( P \) — Principal loan amount (USD)
• \( r \) — Monthly interest rate (decimal)
• \( n \) — Total loan term (months)
• \( k \) — Number of payments made
• \( Payoff \) — Remaining balance to settle loan (USD)

Explanation: The formula calculates the present value of the remaining payments, accounting for the time value of money through compounding interest.

3. Importance of Full Settlement Calculation

Details: Knowing your full settlement amount helps when considering early loan payoff, refinancing options, or understanding your current loan liability.

4. Using the Calculator

Tips: Enter the original loan amount, monthly interest rate (as decimal), total loan term in months, and number of payments already made. Ensure all values are positive and payments made don't exceed total term.

5. Frequently Asked Questions (FAQ)

Q1: How do I convert APR to monthly rate?
A: Divide the annual percentage rate (APR) by 12 (for months) and by 100 to convert to decimal (e.g., 6% APR = 0.06/12 = 0.005 monthly).

Q2: Does this work for any loan type?
A: This works for standard amortizing loans (most mortgages, auto loans). It may not apply to interest-only loans or credit cards.

Q3: Why is my payoff amount higher than expected?
A: Early in the loan term, payments are mostly interest. The principal balance decreases more slowly at first.

Q4: Are prepayment penalties included?
A: No, this calculates only the remaining balance. Check your loan terms for any additional early payoff fees.

Q5: How accurate is this calculation?
A: Very accurate for fixed-rate loans. For variable-rate loans, it's accurate only if rates haven't changed.