Understand how additional payments change your loan
Calculation Methodology
Monthly Payment Formula
This calculator uses the traditional amortization formula:
M = P × [r(1+r)^n] / [(1+r)^n – 1]- M: Required monthly payment
- P: Loan principal
- r: Monthly interest rate (APR/12)
- n: Number of installments
Interest Calculation
For every payment period:
Interest = Balance × Monthly Rate
Principal = Payment – Interest
Remaining Balance = Prior Balance – PrincipalPrepayment Impact
Applying extra payments directly reduces the outstanding principal. As principal decreases, interest charges also fall, creating a snowball effect that shortens the payoff timeline and reduces total interest.
Lump Sum Payment
A lump sum entered at a chosen period is fully credited to principal and instantly lowers future interest amounts.
References
- Standard Amortization Concepts
- CFPB Loan Calculation Resources
- Federal Reserve Mortgage Standards
Disclaimer: Results are approximate and depend on the information entered. Lender-specific rules or fees may alter actual outcomes. Consult your lender.