Please help with interest math!!!

[sanguine_speed]

Can someone please help me do some math?

According to the bank, a loan for $26,500 over 5 years at 10.1% interest is $564/month. If this is repaid over the entire 5 years, how much interest am I paying? If I pay $750/month instead, how much interest am I paying (how much will I be saving?)? There is no penalty for paying early, and I only pay interest "as I go".

Thanks. Lately I'm : Baby's been up since 3:30 this morning, only napping when I'm driving of course .

[pbjmama]

5 years = 60 months
26500/60 = $441.67 per month with out any interest
$564-441.67 = $122.33 interest a month
for a total of
$122.33 x 60 = $7339.80 in interest over 5 years

Hopefully someone else will check my math

[sanguine_speed]

Originally Posted by pbjmama

5 years = 60 months
26500/60 = $441.67 per month with out any interest
$564-441.67 = $122.33 interest a month
for a total of
$122.33 x 60 = $7339.80 in interest over 5 years

Hopefully someone else will check my math

Thanks!

What about if we paid $750 a month instead? I'm not sure how to figure out how the interest accrues...

[annethcz]

I used this loan calculator http://www.bankrate.com/brm/popcalc2.asp

Given the terms you specified, it gives a monthly payment of $564.35, and total interest paid over the 5 year term is $7361.09.

If you increase the monthly payment to $750 (an extra $185.65) per month, the loan will be paid off in 3 years and 8 months with the total of $5063.81 paid in interest.

So you can pay off the loan 1 year and 4 months ahead of schedule, saving yourself $2297.98 if you increase the payments to $750/month.

[polyhymnia]

Originally Posted by pbjmama

5 years = 60 months
26500/60 = $441.67 per month with out any interest
$564-441.67 = $122.33 interest a month
for a total of
$122.33 x 60 = $7339.80 in interest over 5 years

Hopefully someone else will check my math

I'm not super knowledgable about this but I believe that is too simplistic. There may be loans that work like this but most loans accrue interest as they age rather than all at once, and so each payment pays progressively more toward principal and less toward interest.

I believe what you want is an amortization table. Excel will build one for you. I have to go sort out dinner but I'll come back and see if I can sort it out for you if nobody else has.

[normajean]

Originally Posted by pbjmama

5 years = 60 months
26500/60 = $441.67 per month with out any interest
$564-441.67 = $122.33 interest a month
for a total of
$122.33 x 60 = $7339.80 in interest over 5 years

Hopefully someone else will check my math

This is a rough estimate, because at the beginning of the loan your balance is higher so you pay more interest and later in the life of the loan the balance is lower so more goes to principal. That is why extra payments to principal early on in the loan save lots in future interest payments.

[pbjmama]

Yes, I should have mentioned that it wouldn't be precise, just a reasonable estimate.

You can use a debt calculator, just google it.
Okay, I googled it for you this one should work under "loan"
http://www.mvelopes.com/budget-cente...ator/index.php

You are looking at 42 months vs. 60 if you do $750 a month and a savings of $2291.59