1. What is the Loan Payment Formula with Extra Payments?

The loan payment formula with extra payments calculates how much you can reduce your loan term by making additional payments. It accounts for both regular payments and extra payments, showing their combined effect on paying off the principal faster.

2. How Does the Calculator Work?

The calculator uses the loan payment formula with extra payments:

Where:

• \( PV \) — Principal loan amount (USD)
• \( PMT \) — Regular monthly payment (USD)
• \( r \) — Monthly interest rate (decimal)
• \( n \) — Number of months
• \( Extra \) — Additional monthly payment (USD)

Explanation: The equation calculates how extra payments reduce the loan term by applying additional principal payments each month.

3. Importance of Extra Payments

Details: Making extra payments can significantly reduce the total interest paid and shorten the loan term. Even small additional payments can have a large impact over time.

4. Using the Calculator

Tips: Enter the principal amount, regular payment, annual interest rate, and extra payment amount. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How much can extra payments shorten my loan term?
A: This depends on the loan amount, interest rate, and size of extra payments. Even $50-100 extra per month can shorten a 30-year mortgage by several years.

Q2: Should I make extra payments or invest the money?
A: This depends on your loan interest rate vs. expected investment returns. Paying down high-interest debt usually makes more financial sense.

Q3: Do extra payments reduce principal immediately?
A: Yes, extra payments typically go directly toward principal after covering any accrued interest for that period.

Q4: Are there prepayment penalties?
A: Most loans don't have prepayment penalties, but check your loan agreement to be sure.

Q5: How often should I make extra payments?
A: Consistency is key. Regular extra payments (even small ones) have more impact than occasional large payments.