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Simple Interest Formula:
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The Simple Interest Loan Calculator Extra Payment calculates the interest saved when making extra payments on a simple interest loan. It helps borrowers understand how additional payments can reduce the total interest paid over the life of the loan.
The calculator uses the simple formula:
Where:
Explanation: The formula calculates the difference between the original interest that would have been paid and the reduced interest amount after applying extra payments toward the principal.
Details: Calculating interest saved helps borrowers make informed decisions about making extra payments, potentially saving significant amounts of money and paying off loans faster.
Tips: Enter the original interest amount and the new interest amount after extra payments. Both values must be valid non-negative numbers.
Q1: How do extra payments reduce interest on simple interest loans?
A: Extra payments reduce the principal balance, which in turn reduces the amount of interest calculated on the remaining principal in subsequent periods.
Q2: Should I make extra payments toward principal?
A: Yes, making extra payments toward principal can significantly reduce the total interest paid and shorten the loan term.
Q3: Are there any penalties for making extra payments?
A: This depends on the loan terms. Some loans may have prepayment penalties, so check with your lender before making extra payments.
Q4: How often should I make extra payments?
A: Even occasional extra payments can help. Consistency is key - regular extra payments will maximize interest savings.
Q5: Does this calculator work for compound interest loans?
A: No, this calculator is specifically designed for simple interest loans where interest is calculated only on the principal amount.