Paying additional principal per month can save significant interest payments over the life of the loan. In this video, learn how to calculate those savings.
- [Instructor] In the previous movie,…I created formulas to calculate the principle…and interest components of a loan.…Many loans let you pay additional principle per month,…which reduces the total amount of interest you owe.…In this movie, I'll show you how to calculate…your interest savings from paying at extra principle.…My sample file is the ExtraPrinciple workbook…and you can find it in the Chapter01 folder…of the Exercise Files collection.…In this worksheet, I have all of the information…that I need for my calculations.…At the top, I have the rate,…the annual percentage rate of this loan.…
In this case, we're assuming a 30 year standard home loan…with a rate of 4 3/4%.…We have 12 payments per year, 360 total payments,…and a loan amount of $570,000.…To determine the effect of extra principle,…I also have the base payment and any extra principle.…At the end of the movie, I will calculate the total interest…for the base loan, and also total interest paid…for the loan where we pay additional principle per month.…
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- Calculating the effect of interest rates and inflation
- Finding the arithmetic and geometric means of growth rates
- Calculating the future and present value of an investment
- Calculating loan payments for a fully amortized loan
- Calculating the effect of paying extra principal with each payment
- Finding the number of periods required to meet an investment goal
- Calculating net present value and internal rate of return
- Building a cash tracking worksheet
- Visualizing cash flows using a waterfall chart