Loan Repayment Calculator With Extra Payments

Loan Amortization Formula:

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

Loan Amount:

Annual Interest Rate:

Loan Term:

years

Extra Monthly Payment:

Monthly Payment:

Total With Extra Payments:

Total Interest Paid:

Months Saved:

Interest Saved:

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1. What is Loan Amortization?

Loan amortization is the process of paying off a debt over time through regular payments. Each payment covers both interest charges and repayment of principal. The amortization schedule shows how each payment is split between principal and interest.

2. How Extra Payments Affect Your Loan

Extra payments directly reduce the principal balance of your loan, which:

Reduces the total interest paid over the life of the loan
Shortens the loan term
Builds equity faster

3. Understanding the Calculation

The calculator uses these 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 k
\( Balance_{k-1} \) — Remaining balance after previous payment
\( r \) — Monthly interest rate (annual rate ÷ 12)
\( PMT \) — Regular monthly payment
\( extra \) — Additional payment amount
\( Principal_k \) — Principal portion of payment k

4. Using the Calculator

Tips: Enter the loan amount, interest rate, and term. Add any extra monthly payment you plan to make. The calculator will show your amortization schedule and savings.

5. Frequently Asked Questions (FAQ)

Q1: How much can I save with extra payments?
A: Even small extra payments can save thousands in interest and shorten your loan term significantly.

Q2: Should I pay extra principal or invest?
A: Compare your loan interest rate with potential investment returns. Paying down high-interest debt usually provides better guaranteed returns.

Q3: When is the best time to make extra payments?
A: Earlier payments save more interest since more of each payment goes toward interest in the early years.

Q4: Are there prepayment penalties?
A: Most loans don't have them, but check your loan agreement to be sure.

Q5: How do I make sure extra payments go to principal?
A: Specify with your lender that the extra payment should be applied to principal, not future payments.