Paying a lump sum into a loan?

Greegie

Hello,

I need some advice (or for someone to point me towards a calculator). I have a loan I have been paying off for 20 months. It is a 60 month total period.

The original amount was £7500. The current balance is just over £5600 now. I have £2000 which has come available and I was wondering how I calculate how much time it would shave off my loan?

I want to see if it is worth paying it in to get it paid off as soon as possible or whether I have already paid the bulk of the interest and wouldn't save that much?

The provider does allow me to pay lump sums in without penalty. I only pay a penalty (3 months interest) if I settle the entire balance.

Thanks in advance.

CLAPTON

you will save the interest on 2000 at whatever interest rate you are paying for 40 months


loans are not 'front' loaded with interest although obviously you pay more interest in the early stages as you owe more

interest per month = amount owing x interest rate/12 approximately

Greegie

Thanks Clapton, that is the kind of formula I am looking for, now I can figure it all out

danielhermann

It is always good that you pay off the lump sum amount when you have it. Any bank will allow the repayment in lump sum may be with some percentage of penalty which will be always lesser than the interest percentage that you are paying. So in a way you can save on the interest part which is in a way a savings to you.