Early payment of loan

Poochie05

I've been paying off a bit extra on a variable term loan, anytime I can. Is this actually saving me anything as the monthly repayments include interest which was calculated on the 5 year re-payment plan or will it just mean I pay the original amount agreed but quicker?
I've been trying to calculate what the interest added every 3 months would be if I just made the scheduled payments vs the actual interest added with the payments I am making but there doesn't seem to be a handy formula out there and I am completely lost.
It seems very complicated to calculate interest on an account. All the financial advisors say check your statements but I wouldn't have a clue if interest had been calculated correctly or not.

Jet Black

Poochie05 wrote: »

It seems very complicated to calculate interest on an account. All the financial advisors say check your statements but I wouldn't have a clue if interest had been calculated correctly or not.

It is very complicated and the financial advisors who say this probably dont have a clue themselves.

The interest is calculated on a daily basis basis on the amount owed on the loan and the interest rate. The interest is then added every three months based on these calculations. Because its a variable loan the interest can change all the time.

It is possible to work it out but as I said its very complicated.


Also note that the more you pay off the better as the interest added every three months will be less.

Poochie05

Thanks - I suspected as much!