1. What is a Lump Sum Loan Repayment Calculator?

Definition: This calculator determines the savings achieved by making a lump sum payment toward a loan.

Purpose: It helps borrowers understand how much they can save by making additional principal payments on their loans.

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

• \( \text{Savings} \) — Amount saved by making lump sum payment ($)
• \( \text{Total} \) — Original total repayment amount ($)
• \( \text{New Total} \) — Revised total repayment after lump sum payment ($)

Explanation: The difference between the original total repayment and the new total repayment shows your actual savings.

3. Importance of Lump Sum Payment Calculation

Details: Calculating potential savings helps borrowers make informed decisions about making additional payments and can significantly reduce total interest paid.

4. Using the Calculator

Tips: Enter the original total repayment amount and the new total repayment amount after making a lump sum payment. Both values must be > 0.

5. Frequently Asked Questions (FAQ)

Q1: How do I find the original total repayment amount?
A: This is typically provided in your loan amortization schedule or can be calculated using a loan calculator.

Q2: How does a lump sum payment affect my loan?
A: A lump sum payment reduces your principal balance, which decreases the total interest you'll pay over the life of the loan.

Q3: Should I make lump sum payments?
A: If you have extra funds and your loan has a higher interest rate than your investment returns, lump sum payments can be beneficial.

Q4: Will this calculator show me the new loan term?
A: No, this only calculates savings. Use an amortization calculator to see how lump sum payments affect your loan term.

Q5: Are there any penalties for lump sum payments?
A: Some loans have prepayment penalties. Check your loan agreement before making additional payments.