Repayment Calculator With Extra Payments

Repayment With Extra Payments Formula:

\[ \text{New Balance} = P - \text{Extra} \] \[ M_{\text{new}} = \text{New Balance} \times \frac{r \times (1 + r)^{n_{\text{remaining}}}}{(1 + r)^{n_{\text{remaining}}} - 1} \]

Original Principal (P):

currency units

Extra Payment Amount (Extra):

currency units

Annual Interest Rate:

Remaining Months (n_remaining):

months

New Balance (Remaining Principal):

New Monthly Payment (M_new):

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1. What is the Repayment Calculator With Extra Payments?

This calculator helps determine how extra payments affect your loan repayment schedule. It calculates the new remaining balance and adjusted monthly payment after applying an extra payment toward your principal.

2. How Does the Calculator Work?

The calculator uses the following formulas:

\[ \text{New Balance} = P - \text{Extra} \] \[ M_{\text{new}} = \text{New Balance} \times \frac{r \times (1 + r)^{n_{\text{remaining}}}}{(1 + r)^{n_{\text{remaining}}} - 1} \]

Where:

\( P \) — Original principal amount (currency units)
\( \text{Extra} \) — Extra payment amount (currency units)
\( r \) — Monthly interest rate (decimal)
\( n_{\text{remaining}} \) — Remaining number of months
\( M_{\text{new}} \) — New monthly payment amount (currency units)

Explanation: The formula first reduces the principal by the extra payment amount, then recalculates the monthly payment based on the remaining balance and term.

3. Importance of Extra Payment Calculations

Details: Making extra payments can significantly reduce the total interest paid over the life of the loan and shorten the repayment period. This calculator helps borrowers understand the impact of additional payments on their financial obligations.

4. Using the Calculator

Tips: Enter the original principal amount, the extra payment you plan to make, the annual interest rate, and the remaining number of months. Ensure all values are positive and the extra payment does not exceed the principal balance.

5. Frequently Asked Questions (FAQ)

Q1: How do extra payments affect my loan?
A: Extra payments reduce your principal balance, which decreases the total interest you'll pay and may shorten your loan term.

Q2: Should I make extra payments or invest the money?
A: This depends on your interest rate and investment returns. Generally, if your loan interest rate is higher than expected investment returns, paying down debt is better.

Q3: Are there penalties for extra payments?
A: Some loans have prepayment penalties. Check your loan agreement before making extra payments.

Q4: How often can I make extra payments?
A: This varies by lender. Some allow extra payments anytime, while others may have restrictions.

Q5: Do extra payments automatically reduce my monthly payment?
A: Not necessarily. Some lenders recast the loan (recalculate payments), while others apply payments to principal but keep the same payment schedule.