Calculate how extra payments affect your loan
Calculation Methodology
Monthly Payment Formula
Monthly payments are determined using the standard amortization equation:
M = P × [r(1+r)^n] / [(1+r)^n – 1]- M: Monthly payment
- P: Original principal
- r: Monthly interest rate (APR ÷ 12)
- n: Total number of monthly payments
Interest Calculation
Each billing cycle:
Interest = Current Balance × Monthly Rate
Principal = Monthly Payment – Interest
Updated Balance = Previous Balance – PrincipalPrepayment Impact
Extra payments reduce the principal immediately, which lowers future interest charges. Over time this compounding effect shortens the loan term and cuts total interest costs.
Lump Sum Payment
A single lump sum applied at any chosen time goes directly toward principal, instantly reducing the balance and lowering all subsequent interest calculations.
References
- Financial Mathematics – Amortization Standards
- CFPB Guidelines for Loan Calculations
- Federal Reserve Loan Rules
Disclaimer: This tool offers estimates based on user inputs. Actual loan figures may vary depending on lender terms, fees, and policies. Always verify with your lender.