How much will I save by making extra principal payments?
The answer depends on :
- The balance of the loan
- The loan's interest rate
- The payments remaining
- And the additional amount paid
This amortization schedule will let you know what making extra payments will save you for your circumstances. The payment schedule supports:
- one "lump-sum" extra payment
- a specific number of extra payments
- extra payments until you've paid off the loan
- extra payments at a different frequency and on different dates than the "normal payment"
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An extra payment example
Assume you have a $400,000 at a 3.5% rate. Finding out how much you'll save if you make just an extra $100 payment until you've paid off the loan is easy. The amortization schedule will answer the question whether you've just taken out the loan or if the loan is one you've paid on for a while.
Set the calculator up this way:
- Loan Amount/Current Balance: 400,000.00
- Number of Payments (#): 360
- Annual Interest Rate: 3.25%
- Periodic Payment Amount: 1,740.83
- Extra Amount to Pay: 100.00
- Extra Payments Start: <as appropriate>
- Extra Payment Frequency: Monthly
- Number of Extra Pmts (#): Unknown
- The calculator will calculate the regular periodic payment for you if you enter a "0". If you know the amount, you can enter it, and the payment schedule will use it.
- If you want to calculate the interest, you'll save on an existing loan start by entering the loan's current balance and the number of remaining payments.
- Assume you've received a large bonus, and you want to calculate the impact of making a single, lump-sum payment. To find out, change "Unknown" to "1" in step 8.
- Like all calculators on this site, this one is very flexible. The frequency of additional payments does not need to be the same frequency as the scheduled payments. The extra payments also do not need to fall on the same date as the normal payments.
The amortization schedule
Study the payment schedule. Notice when there is an additional payment, the calculator uses 100% of the amount to reduce the balance. This is the case even when you make the extra payment between the scheduled payment dates. If you are making extra payments, you will want to use this calculator to verify that your lender applies the entire payment to principal. Some lenders do not do this
The amortization summary and interest saved
The amortization schedule's summary header clearly shows you the amount of interest you will save by making extra payments.
A note on terminology. Extra payments are not "extra." Therefore, this amortization calculator also uses the more appropriate term, prepaid principal, in the results area and schedule.
Help with Amortization and Extra Payments
The accelerated payment calculator will calculate the effect of making extra principal payments. A minimal extra principal payment made along with a regular payment can save the borrower a large amount of interest over a loan's life, particularly if those payments start when the debt is relatively new.
For example, assume that you have taken out a loan for $260,386 for 360 monthly periods with an annual interest rate of 4.25%. If with the six months after the start date, you pay an extra $200, you will save over $50,000 in interest payments, and the schedule shows us that you'll have paid off the loan in 272 payments instead of the original 360 payments.
It is straightforward to calculate many different scenarios quickly. Note that the higher the interest rate, the greater the savings for any extra payment amount. Also, for a standard amortizing loan, the interest savings will be more significant the sooner the additional payments start. That is, you will save a lot more in interest if you pay an extra $50 a month for the last 20 years than if you pay an extra $100 a month for the previous ten years.
As with many of our other calculators, this calculator will also solve for an unknown input. For example, if you want the calculator to calculate the regular monthly payment, enter '0' (zero) for the "Periodic Payment Amount" and a non-zero value for "Loan Amount/Current Balance," "Number of Payments," and "Annual Interest Rate."
If you do not enter a '0' value, the calculator will use your inputs. This allows you to use any payment amount that you need.