Early Payoff Formula:
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The early payoff calculation determines the remaining balance (RB) needed to pay off a loan before its scheduled term ends. This helps borrowers understand how much they would need to pay to settle their debt immediately.
The calculator uses the early payoff formula:
Where:
Explanation: The equation calculates the present value of all remaining payments, discounted at the loan's interest rate.
Details: Knowing your early payoff amount helps in financial planning, especially when considering refinancing, selling collateral, or paying off debt to save on interest.
Tips: Enter your regular monthly payment amount, the monthly interest rate (annual rate divided by 12), and the number of payments remaining. All values must be positive numbers.
Q1: Does this include any prepayment penalties?
A: No, this calculation only shows the remaining principal balance. Check your loan terms for any additional fees.
Q2: How accurate is this calculation?
A: It's mathematically precise for fixed-rate loans where payments are applied consistently to principal and interest.
Q3: Can I use this for credit cards or variable-rate loans?
A: This works best for fixed-rate installment loans. For variable rates, you'd need to know future rate changes.
Q4: Why is my payoff amount different from my principal balance?
A: The payoff includes accrued interest up to your next payment date, while principal balance doesn't include pending interest.
Q5: How can I reduce my early payoff amount?
A: Making extra principal payments reduces both your remaining term and total interest paid.