If I Pay Off A Loan Early?

1. Steve D Says

   No, you will not pay the last year of interest – how much you save depends on how you pay it off. The bank does NOT take all its interest up front – although the majority of the payment for the first few years is a majority interest, you are paying some toward the principal. Each month, you pay a little less interest and a little more principal.
   In a perfect world, you would have the fifth year of payments all saved up and use them (plus the actual first payment) to make your first payment. this would reduce your principal at the time you are paying the most interest, thus being the most beneficial. Alternatively you can make extra principal payments each month, which will also lower your total interest paid as well as pay the loan off early.
   The worst way to do this would be to wait until you have paid four years of payments and then make one big payment to pay off the loan – this saves the least amount of interest, since you have made those big interest payments up front.
   To get an idea of how this works, find an online payment calculator (most bank websites have them), punch in a loan and interest number and look at the amortization schedule. This gives you the running balance, and the amount paid toward interest and principal on a running basis. Then look at the calculator – most have a place you can put various extra payments (i.e., an extra lump sum or a series of payments towards principal).

2. sleaze Says

   no unless the terms on ur loan agreement state that

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