-1

I have a loan with Lending Club with a certain interest rate. So every month I pay the principal as well as about $200 in interest. Assuming the loan balance left is $20000 and the interest rate is 7%, What affect does an additional $5000 payment will have on the interest savings (if any?)

1

Depends on the terms of the loan.

Some loans apply the additional payment as advance payment of the next billing cycle. For those, the only advantage of paying in advance is that it build a buffer against possible missed payments late.

Some loans apply additional payment to the principal. That _does reduce the total interest you'll pay, perhaps more than you would expect due to compounding.

Many are willing to do either, but if you don't tell them that you want the additional money applied to the principal they usually default to taking it as a prepayment only.

Check with your lender to find out what options are available to you and how to tell them what you want them to do.

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.