My loan was $40500 for five years with 9% interest per year. I do not understand the total I would have to pay. I have been paying 700 per month since 2006 and it feels like I've been paying forever. I really don't understand...my balance now is $13,092.50. Please help me understand this, in layman's term.
If your loan payment schedule was set up correctly, you should have been paying $840.71 per month for 5 years and would have been finished with the loan by 2011. By paying only $700 each month, you have effectively extended the loan to a longer term than 5 years, about 6 years and 4 month.
Who told you that the monthly payment was $700? the lender? or is that amount what you could afford to pay and you decided to cut back on the required payments? Did you miss any payments? paid late and were charged late payment fees that got added to the loan? Because if you have been paying $700 on time each month beginning some time in 2006, your loan should have been paid off more than 2 years ago. So, something is awry here, and perhaps you have not revealed the whole story.
Several websites have free calculators that can tell you how long it would take to pay off $40,500 at 9% for a fixed monthly payment. See, for example, this one which I used to calculate the numbers mentioned here
Take a look at this graph here: http://mortgagevista.com/#m=1&a=40500&b=9&c=5y&d=1/2006&A&B&C&D&E&F&oa&ob&oc&od
The graph should already set up with all of your loan details described in your question (you can change the exact starting month in 2006 if you like). Mousing over the lines on the graph can help you get a better understanding of how your payments are applied each month to both principal (how much you owe[brown line]) and interest (how much you are paying the bank for borrowing the money [purple line]). When dealing with amortized loans it is important to note that at the beginning of your loan a larger amount of your monthly payment goes towards interest (paying the bank back for borrowing the money) with less going toward the principal (how much you need to pay back). Due to this often it can be surprising how much principal is left even after make payments for numerous years.
Also, please note in the lower left hand corner: The monthly payment amount is $840.17. If you had been paying this amount the loan would have been paid off in full after 5yrs and the total amount you would have paid would have been $50,442.80.
However, in your post you mentioned that you have only been making payments of $700. This would not have been sufficient to repay the loan within 5yrs if you are in fact paying 9% interest.
Below is the graph for the same loan but with a payment of about $700 each month.
You will see that at this payment amount it takes longer to fully pay off the loan (about 1.5 years longer). So, if you really started making payments in 2006 and you really have made each payment at $700 on time without incurring any additional fees your loan should have already been paid off by now.
If you want to do the math yourself, here is the first year as example:
9% of 40500 is 3645 interest; you paid 12 * 700 = 8400 $. So at the end of the year, you'd have 40500 + 3645 - 8400 = 35745 left. Continue to calculate that way for each year, and it gives you an idea what is going on.
Note that depending on the bank and the conditions, they add interest every month, or daily, and they count your payments on the day they come in, or on the day they were due, or some other detail could be different. This should have not a lot of influence on the total and the calculation, but you might be some dollars off from what the statement says.