Extra Payment Definition Use our free Extra Payment Calculator to find out just how much money you are saving in interest by making extra payments on your auto, home, or other installment loans. When you are approved for a loan, the disclosure describes exactly how much interest you will pay over the life of the loan if you make all of your payments on time and you pay only the amount due. Unfortunately, this loan disclosure does not show the borrower what they can save in interest if they make extra payments each month to pay down the principal of the loan.
Why Make Extra Payments? By making extra payments on your loan, you can pay down the principal and reduce interest charges each and every month. The savings can add up over time and total in the thousands depending on the amount borrowed, the interest rate of the loan, and the term.
Find Out How Much You Can Save With This Calculator Determining how much you can save in interest when you make extra payments can be extremely difficult if you attempt to do this by hand. By using an advanced calculator, you can see the savings in a matter of seconds and persuade yourself to bite the bullet and pay more every time you receive your car or mortgage loan statement. Even just an extra payment of $20 per month can make a huge different over a 30 year term. You can see the savings for yourself by inputting all of the correct information in the fields above and pressing calculate. The extra payment calculator allows you to enter the following figures:
Loan amount (total principal of the loan stated on the contract)
Years to payoff (term of the loan stated on the contract)
Annual Interest Rate (the fixed APR charged to borrow)
Extra payment per month (how much you plan to pay extra on a monthly basis)
After you enter all of the figures, simply press calculate. The calculator will use all of the date you have entered and will display the following information for you to review:
Original total cost – The total cost of the loan plus interest if no extra payments were made.
With extra payment – The total cost of loan plus interest if extra payments are made.
Total saved – How much you will save in interest by making extra payments consistently.
If you want to calculate how much you would save by paying more or less of an extra payment, simply press the back button and you can modify the extra payment amount. All of the data entered in the fields will be saved if you press the back button that is located within the calculator.
Factors to Consider When Using the Extra Payment Calculator Here is some important information you should keep in mind whenever using the extra payment calculator:
The total saved reflects the savings if you pay the same extra every month at the start of the loan. If you start making extra payments after the loan inception date, the figure may be different.
If you have been assessed late fees or other charges, the total saved may vary.
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How to Calculate Extra Payment Let's be honest - sometimes the best extra payment calculator is the one that is easy to use and doesn't require us to even know what the extra payment formula is in the first place! But if you want to know the exact formula for calculating extra payment then please check out the "Formula" box above.