01-28-2013 01:06 AM
Hey folks, Trying to help my mother out and fill my own curiosity. Anyone know a link that can tell you what the effective APR is after a lumpsum payment to a loan? My mom took a loan $21K, 4.69% apr, 72 months, 367 a month payment, She pays $600 a month and took $4000 out of her tax refund and made a lumpsum principle payment. LOL, she started out before she realized she had to specifiy extra payments have to specified as principal and now she actually doesn't have a payment due until nov 2013.
Anyways, What I want to find out, is what the actuall effective interest rate she is paying with her lumpsum and overpayments to principle. Can anyone tell me what the formula is or point me in the direction of a calculator?
01-28-2013 04:43 AM
Go to Bankrate (dot) com and put in the original terms and date and calculate what the total amount of interest would have been for the loan as written.
Then recalculate with the $4000 principal payment. You will see the difference in interest.
The APR, if it calculates it, will actually show a little higher because you have a fixed payment on a lower amount and the fixed payment isn't changed, just the time of payoff is reduced.
So the question you really want to know, I assume, is how much interest she is going to save over the life of the loan. Which should be substantial with a $4000 lump sum payment.
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