This loan payoff calculator can help you estimate when you can be debt free & how much you need to do so either by making extra payments or by paying off altogether. You can also calculate how much you can save by paying off earlier. Below the tool you can understand more about the payment amounts needed.
How to pay off your loan earlier than the initial amortization schedule?
There are basically two options available to repay your loan earlier than expected and both can result in some savings:
1. First scenario is by paying off your loan altogether. At a first glance, you have to know the initial loan amount borrowed, the initial repayment term in years, the time left to pay in yearns and months and the annual interest rate.
Providing the above details into this calculator, you’ll be able to determine the amount you need to have in order to make a final single payment that covers the principal amount left.
Apart from the principal amount to be paid you’ll also be given the rough figure of the interest you save by paying off altogether, the count of the monthly payments made so far and how much principal and interest were paid by these regular payments.
2. Second option is to repay your loan balance with monthly extra payments added to the standard ones as they were agreed within your borrowing contract. In this case apart from the current details of the payment schedule requested in first scenario, you’ll have to assume how much you can afford to add as an extra amount to your regular monthly payments.
Please note that the additional payments go on paying the principal figure only, thus in the end they result in savings from interest and in paying in full your debt earlier than the pay-off date specified in your amortization schedule.
What to take into account before deciding to pay off early your loan?
The decision whether to pay off early your loan can be made by considering several aspects as explained here which aim to clarify how useful would this strategy be:
1. What types of loans do you owe and how high are their interest rates?
The recommended approach would be to try and payoff early the loan that carries the highest interest rate. It is well known that credit cards have the highest interest rates in comparison to the other types of debts.
Thus whenever you can afford to it is recommended to try pay off credit card negative balance first as you can save more interest than in case of other loans such as home loans, auto loans or student loans which usually carry lower interest rates.
2. Are there any penalties for paying off your loan early?
Before deciding to pay off early your debts please take into account the fact that some lenders charge a fee for early repayments that is usually stated in your borrowing contract so you may need to check that first.
In case these fees exist you have to determine if by paying off earlier than agreed you pay less than the total left to be paid.
More specifically you have to check whether the amount of the principal plus the one of the repayment fee is less than the total left to be paid by regular payments (principal + interest).
3. Which is the time left to pay and is it worth risking that?
Whenever analyzing how beneficial will be an early pay off you have to consider the time left to repay, what savings are made from interest and whether there are risks of default in case you owe several types of loans or the risk of not being able to cover your monthly bills so please double check your monthly budget.30 Dec, 2015