I have been having some difficulties with figuring out how to calculate for early repayment.
The question goes: You take a 6 year loan of $25,000 with 7% annual interest rate and quarterly payments starting end of year 1.
I have solved for the quarterly loan payments = $1,284.64
Now comes the part that I am really confused about! If I decide to pay off the loan at time 3, how much would I have to pay including the time 3 payment, assuming no penalty for early repayment?
I have drawn up sections:
Q1:
Payment = 0 , Interest = 0, Principal = 0, Balance = 25,000
Q2:
PMT = 1,284.64, Interest = 437.50, Principal = 847.14, Balance = 24,152.86
Q3:
PMT = 1,284.64, Interest = 422.675, Principal = 861.964, Balance = 23,290.895
Y2Q1:
PMT = 1,284.64, Interest = 407.59, Principal = 877.049, Balance = 22,413.845
The answer is $15,081.10 but I can't seem to get to that. Is my method not it? Is there a formula which does not require drawing up the sections? I do need some clarifications regarding what "time 3" means too, please.
Thank you all so much!
- Struggling Student