One Time Extra Payment Loan Calculator

Loan Payment Formula with Extra Payment:

\[ PMT = P \times \frac{r \times (1 + r)^n}{(1 + r)^n - 1} \]

Principal Amount (P):

USD

Annual Interest Rate:

Loan Term:

years

One-Time Extra Payment:

USD

Monthly Payment (PMT):

Total Payment:

Total Interest Paid:

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1. What is the Loan Payment Formula?

The loan payment formula calculates the fixed monthly payment required to fully repay a loan over its term, including interest. The formula accounts for the time value of money and compounding interest.

2. How Does the Calculator Work?

The calculator uses the standard loan payment formula with extra payment adjustment:

\[ PMT = (P - E) \times \frac{r \times (1 + r)^n}{(1 + r)^n - 1} \]

Where:

\( P \) — Principal loan amount (USD)
\( E \) — One-time extra payment (USD)
\( r \) — Monthly interest rate (annual rate ÷ 12)
\( n \) — Total number of payments (term in years × 12)
\( PMT \) — Monthly payment amount (USD)

Explanation: The formula calculates the monthly payment needed to amortize the adjusted principal (original principal minus extra payment) over the loan term.

3. Importance of Extra Payments

Details: Making extra payments reduces the principal balance faster, which decreases the total interest paid and may shorten the loan term. Even a single extra payment can have significant long-term effects.

4. Using the Calculator

Tips: Enter the loan amount in USD, annual interest rate as a percentage, loan term in years, and any one-time extra payment. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How much can an extra payment save me?
A: Savings depend on loan amount, rate, and timing. Early extra payments have the greatest impact as they reduce principal before much interest accrues.

Q2: Is it better to make extra payments or refinance?
A: Depends on rates and fees. Extra payments are simple and guaranteed, while refinancing may offer better rates but has costs.

Q3: How does this differ from regular amortization?
A: This calculator adjusts the principal balance immediately with your extra payment, recalculating payments based on the new balance.

Q4: Can I make multiple extra payments?
A: This calculator handles one-time payments. For multiple payments, consider an amortization schedule with recurring extra payments.

Q5: Will my monthly payment decrease after extra payment?
A: Typically no - unless you recast the loan. The payment stays the same but more goes to principal, potentially shortening the term.