Loan Payment Calculator With Extra Payments

Amortization Formula With Extra Payments:

\[ Interest_k = Balance_{k-1} \times r \] \[ Principal_k = PMT + extra - Interest_k \] \[ Balance_k = Balance_{k-1} - Principal_k \]

Loan Amount:

Annual Interest Rate:

Loan Term:

years

Extra Monthly Payment:

Monthly Payment:

Total Interest:

Total Payments:

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1. What is the Loan Payment Calculator With Extra Payments?

This calculator shows how making extra payments toward your loan principal can reduce your total interest costs and shorten your loan term. It generates a detailed amortization schedule that accounts for additional principal payments.

2. How Does the Calculator Work?

The calculator uses the following formulas:

\[ Interest_k = Balance_{k-1} \times r \] \[ Principal_k = PMT + extra - Interest_k \] \[ Balance_k = Balance_{k-1} - Principal_k \]

Where:

\( Interest_k \) — Interest portion of payment in period k
\( Principal_k \) — Principal portion of payment in period k
\( Balance_k \) — Remaining balance after period k
\( r \) — Monthly interest rate (annual rate ÷ 12)
\( PMT \) — Regular monthly payment amount
\( extra \) — Additional principal payment

Explanation: Each payment first covers the interest due, then applies the remaining amount (including any extra payment) to reduce the principal.

3. Importance of Extra Payments

Details: Making extra payments toward principal can significantly reduce the total interest paid over the life of the loan and shorten the repayment period. Even small additional amounts can have a substantial impact.

4. Using the Calculator

Tips: Enter the loan amount, interest rate, and term. Optionally add an extra monthly payment amount to see how it affects your amortization schedule. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How do extra payments affect my loan?
A: Extra payments reduce your principal faster, which decreases the total interest paid and may shorten your loan term.

Q2: Should I make extra payments or invest the money?
A: This depends on your loan interest rate vs. expected investment returns. Paying off high-interest debt often provides better returns than conservative investments.

Q3: Are there prepayment penalties?
A: Some loans have prepayment penalties. Check your loan agreement before making extra payments.

Q4: How much can I save with extra payments?
A: Savings vary based on loan terms and extra payment amount. This calculator shows your exact savings.

Q5: Should I refinance instead?
A: If you can get a significantly lower interest rate, refinancing might be better than making extra payments on a high-rate loan.