# *Precision *Financial Calculator

#### Example 3-2 __Additional Principal Payments__

Continue from Example 3-1. With the new interest
rate of 7.125%, Mrs. Gibson estimates that she can have the additional money
of $45,000 to pay off the loan at the beginning of the third year (the 25th
month). How many months can she shorten the loan payment? How much interest
can be saved? Verify the total principal paid from the amortization table. If
she decides to pay $300 each month for the additional principal payments starting
from the third year, what the situation would be?

**[Answer: 73 months, $45,246.54] **

**[Procedures]**

On the Loan calculation tab, type in 136,000 for the loan amount, 180 for
the number of the months, 7.125 for the interest rate. Click the Calc button,
you get the monthly payment of $1231.93. The payment schedule will be displayed
on the Amortization Table tab. Select the Additional Principal Payments check
box. The Additional Principal Payments will show at the last column. Type in
45,000 for the additional amount to pay off at the 25th row on this column and
hit Enter key. You will get the new number of payment months 107. Click on the
Interest column title bar. The Interest column is highlighted. The total interest
paid is $40,500.93. Compared with the original total interest $85,747.47, she
saves $45,246.54. You can see the numbers from the summary chart by clicking
on the chart button. Again, click on the Principal column title bar to get the
total principal paid is $91,000. The sum of this number and $45,000 is $136,000.

Enter 300 to the 37th row on the Additional Principal Payments column and press
Enter key. Click on this cell. Point the mouse pointer to the lower right corner
of this highlighted cell, you will see the pointer icon change to cross-hair.
Now drag this cross hair all the way down to the end row. You will see the term
reduces to 91 months and the total interest paid reduces to $36,623.73. If you
want to verify the total principal to be $136,000, take off the last additional
principal payment $300 since you do not pay this amount at the end.

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