Karen J. Day, EA, CFP®
Lisa Kachel, CFP®

Printed from: www.karendayhg.com

Loan Payoff

What’s the True Cost of the Loan You Are Considering?

Borrowing money can be an expensive proposition. Even at relatively low interest rates, you may be surprised at the amount of interest you pay over the life of a loan. This calculator is designed to help you estimate the true cost of that loan you may be considering.

 

The results below show the monthly payment amount, the interest cost, and the potential tax savings (if the interest on your loan is tax deductible) for the loan you are considering. It may surprise you to learn that for a long-term loan, such as a 30-year mortgage, you could pay more in interest over the life of the loan than you originally borrowed. For example, if you borrow $100,000 at 6% over a 30-year period, you would pay $115,838 in interest — more than the amount you initially borrowed — bringing the total pay-back amount to $215,838.

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Your Results
Description Amount
Original loan amount: $0.00
Term of the loan (in months): $0.00
Monthly payment: $0.00
Total interest payments: $0.00
Assuming the interest is tax deductible, your tax savings would be: $0.00

This chart shows how much the balance of your loan will be over the time period you are making payments. You’ll see that in the early years of the loan, the principal you owe is reduced more slowly than in the later years of the loan. The longer the loan, the more dramatic this effect is. This is because in the early years, a greater portion of your payment goes toward interest on the balance of the loan; as the balance of the loan is reduced, the interest accrued each month is reduced, and more of your payment amount is credited to the loan principal.

Loan Balance Over Time