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Lucy Garcia took out a loan for $40,000 at 10 percent interest for 10 years. Her monthly payments are $528. 60. She made payments for one year and has paid the principal down to $37,546. 36. She now wants to repay the loan early. The loan specifies a $300 prepayment penalty if she pays the loan now. How much will she save by paying the loan early (round final answer to nearest dollar)?

Respuesta :

The amount saved due to early payment is $19,242

Data;

  • Monthly payment = 528.60
  • Number of payment = 10 years * 12 = 120
  • Total payment if not prepaid = 528.60 * 120 = $63,432

Total Payment for the whole term

The total payment for the whole term is the equal to the product of monthly payment and the number of payment as calculated above.

The total amount in cash in case of prepayment is

[tex]total amount in case of prepayment = monthly payment * number completed + balance + penalty[/tex]

The number of payment completed = 12

Balance = $37,546.36

Penalty for prepayment = 300

The amount of prepayment is

[tex]528.60 * 12 + 37546.36 + 300 = 44,189.56[/tex]

The amount saved due to early payment is

[tex]63432 - 44189.56 = 19,242[/tex]

The amount saved due to early payment is $19,242

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