1. What is a Loan Calculator With Lump Sum Payment?

Definition: This calculator determines the remaining loan balance after making a lump sum payment.

Purpose: It helps borrowers understand how a lump sum payment affects their outstanding loan balance.

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

• New Balance — Remaining loan amount after payment ($)
• Balance — Current outstanding loan amount ($)
• Lump Sum — One-time payment amount ($)

Explanation: The lump sum payment is subtracted directly from the current balance to calculate the new remaining balance.

3. Importance of Lump Sum Payments

Details: Lump sum payments can significantly reduce loan terms and interest costs by decreasing the principal balance faster.

4. Using the Calculator

Tips: Enter your current loan balance and the lump sum amount you plan to pay. The lump sum must be ≤ current balance.

5. Frequently Asked Questions (FAQ)

Q1: How does a lump sum payment differ from regular payments?
A: Lump sum payments are additional payments applied directly to principal, while regular payments cover interest and principal according to the amortization schedule.

Q2: Will a lump sum payment reduce my monthly payments?
A: Typically no, unless you request recasting. The payment usually shortens the loan term instead.

Q3: Are there penalties for lump sum payments?
A: Some loans have prepayment penalties - check your loan terms before making extra payments.

Q4: How much interest can I save with lump sum payments?
A: Significant savings are possible since you're reducing the principal balance earlier.

Q5: Should I pay lump sum or increase regular payments?
A: Lump sums have immediate impact, while increased payments provide consistent reduction - both are effective strategies.