Say there’s a loan for $10,000. The interest rate is 11%. Monthly payment is $300.
How can you keep interest at bay, and not pay thousands in interest by the end of it all?
Is there a formula to figure out how much *extra* to pay per month, in order to… cancel out? the interest?
Is this even possible? Is this even how interest works?
Honestly, I don’t get the concept at all. Explain it to me like I’m five.
In: Economics
You can’t cancel out the interest unless you pay the whole loan off at the first payment. However the more money you pay toward the principal the less money goes to interest every month.
I’ll let someone else math this out for you because I’m not able to right this second, but basically the more you pay toward the principal on top of your regular payment the less interest you are paying because it’s calculated monthly based on the principal left.
If you pay double payments, you’ll get paid off in less than half the time, because you’re cutting your interest so drastically. You pay interest all the way up to the last payment. The last payment is probably only $2 in interest, and the first payment is probably closer to $90 going toward interest… So the faster you paid on the principal the less interest you pay over the entire course of the loan. That’s the best you can do.
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