Loan Payment Formula:
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This calculator helps you understand how making extra payments on your personal loan can reduce both the loan term and total interest paid. It uses the standard loan payment formula with adjustments for additional principal payments.
The calculator uses the standard loan payment formula:
Where:
For extra payments: The calculator applies your additional payment directly to principal and recalculates the amortization schedule to determine time and interest savings.
Details: Making extra payments can significantly reduce both the loan term and total interest paid. Even small additional amounts applied regularly can lead to substantial savings over time.
Tips: Enter the principal amount, annual interest rate, loan term in years, and any additional monthly payment you plan to make. All values must be positive numbers.
Q1: How much can I save with extra payments?
A: Savings depend on loan amount, interest rate, and extra payment amount. Even $25-50 extra per month can save thousands over the loan term.
Q2: Should I pay extra principal or invest?
A: Compare the loan interest rate to potential investment returns. Paying down debt is a guaranteed return equal to the interest rate.
Q3: Are there prepayment penalties?
A: Most personal loans don't have prepayment penalties, but check your loan agreement to be sure.
Q4: How are extra payments applied?
A: Extra payments typically go directly to principal, reducing the balance and thus future interest calculations.
Q5: Is it better to make large one-time payments or small regular extra payments?
A: Regular extra payments provide consistent savings, but any extra payment helps. The sooner you reduce principal, the more interest you save.