Cutting down the life of the Loan

TheFate · ‎11-17-2014

Curious on how to punch the numbers in properly to figure out how much time I would chop off my loan by paying a little extra on my monthly?

StartingOver10 · ‎11-17-2014

Go to bankrate.com under the auto calculators and you can experiment with extra payments to shorten the life of the loan. It's already set up, all you have to do is put in your original terms and then below that calculator is a series of input fields for you to select your preferences (monthly, annual or one time) and then hit the button to see the amortization schedule and you will see how much time and money you save with each choice.

MarineVietVet · ‎11-17-2014

@TheFate wrote:
Curious on how to punch the numbers in properly to figure out how much time I would chop off my loan by paying a little extra on my monthly?

This will take you right to it: Auto loan calculator.

TheFate · ‎11-19-2014

How accurate is that Bankrate site?

Doesn't seem right to me.. By paying $100 extra each payment I would think it would chop down the loan faster than a year

seruby · ‎11-19-2014

I'd say it's pretty accurate. Let's say your monthly payment is $400/month. If you pay $100 extra per month, it's almost like making 3 extra payments per year. After 4 years, that would be 12 extra payments - which would be the 5th year. So your payoff is 48 months instead of 60.

Now, if you pay $200, you'd think you're payoff would decrease another 12, but it doesn't - it only decreases another 8. If you pay $200 extra a month, you're making 6 extra payments per year. After 3 years(36 months), that would be 18 extra payments, which would only be 54 months of payments,. After 3.25 years (40 months) , you'll have made 19-20 months of extra payments, whih would be the 60 months. So paying $100 reduces your payoff by 12 (to 48), but paying $200 extra reduces it by 20 (to 40).

All in all, I'd say you can trust the bankrate calculator.

MarineVietVet · ‎11-19-2014

@TheFate wrote:
How accurate is that Bankrate site?

Doesn't seem right to me.. By paying $100 extra each payment I would think it would chop down the loan faster than a year

Here are a few more. You might compare the results to Bankrate.

http://www.cars.com/go/advice/financing/calc/loanCalc.jsp?mode=full

http://www.onlineloancalculator.org/

http://www.autotrader.com/calculators/

http://www.edmunds.com/calculators/

TheFate · ‎11-19-2014

@seruby wrote:
I'd say it's pretty accurate. Let's say your monthly payment is $400/month. If you pay $100 extra per month, it's almost like making 3 extra payments per year. After 4 years, that would be 12 extra payments - which would be the 5th year. So your payoff is 48 months instead of 60.

Now, if you pay $200, you'd think you're payoff would decrease another 12, but it doesn't - it only decreases another 8. If you pay $200 extra a month, you're making 6 extra payments per year. After 3 years(36 months), that would be 18 extra payments, which would only be 54 months of payments,. After 3.25 years (40 months) , you'll have made 19-20 months of extra payments, whih would be the 60 months. So paying $100 reduces your payoff by 12 (to 48), but paying $200 extra reduces it by 20 (to 40).

All in all, I'd say you can trust the bankrate calculator.

It's close but I think it may be off by a month or two

Lets say your term is 75 months and you send 100 bucks extra each payment= $7,500

According to the calc you're only cutting the loan down 12 payments by doing so. 12 payments x your monthly ($534.27)= $6,411.24

Wheres the remaining $1,088.76?

seruby · ‎11-20-2014

... did not mean to hit reply before being able to read further but I imagine that "missing money" is interest

Anonymous · ‎11-20-2014

@TheFate wrote:
It's close but I think it may be off by a month or two

Lets say your term is 75 months and you send 100 bucks extra each payment= $7,500

According to the calc you're only cutting the loan down 12 payments by doing so. 12 payments x your monthly ($534.27)= $6,411.24

Wheres the remaining $1,088.76?

First, if you have 75mo term and you pay an extra $100/mo, you won't be making 75x$100=$7,500 extra in payments, because you will pay off early and won't make 75 total payments.

Also you can't forget that if you have a non-zero interest rate, your $500/mo monthly payment doesn't take $500 off your balance every month. Some of this payment goes towards paying interest. As the principal balance decreases, the amount of interest paid per payment decreases and the amount of principal paid increases. You add to your payment to bring the principal down faster, and consequently subsequent payments go more to the principal than if you had only made the required minimum monthly payments.

All of the calculators I've used online have the option to see a full amortization table, which breaks down how much of your payment each month goes towards the principal, how much goes towards interest, and what your balance will be at the given month. They also allow you to calculate this table, say, by adding an extra payment each month. I am a fan of bankrate's calculators.

TheFate · ‎11-20-2014

@Anonymous wrote:
@TheFate wrote:
It's close but I think it may be off by a month or two

Lets say your term is 75 months and you send 100 bucks extra each payment= $7,500

According to the calc you're only cutting the loan down 12 payments by doing so. 12 payments x your monthly ($534.27)= $6,411.24

Wheres the remaining $1,088.76?
First, if you have 75mo term and you pay an extra $100/mo, you won't be making 75x$100=$7,500 extra in payments, because you will pay off early and won't make 75 total payments.

Also you can't forget that if you have a non-zero interest rate, your $500/mo monthly payment doesn't take $500 off your balance every month. Some of this payment goes towards paying interest. As the principal balance decreases, the amount of interest paid per payment decreases and the amount of principal paid increases. You add to your payment to bring the principal down faster, and consequently subsequent payments go more to the principal than if you had only made the required minimum monthly payments.

All of the calculators I've used online have the option to see a full amortization table, which breaks down how much of your payment each month goes towards the principal, how much goes towards interest, and what your balance will be at the given month. They also allow you to calculate this table, say, by adding an extra payment each month. I am a fan of bankrate's calculators.

Actually you're right, If I paid $100 extra each payment then it would be 63 payments totaled to $6,300.

So basically with the terms I have, paying $100 extra will reduce 1 year and paying $200 extra will reduce 22 months and i'll save $1172.68 vs only $690.18! So I'll see how long I can do that for, would love to get this loan knocked down as soon as possible.

Is it true paying your car off early hurts your score? I would think it would be the other way around...more trust worthy