Question

After graduation, you decide that you can pay $203.24 per month extra on your student loan (standard monthly payment is 302.99), which has a balance of $50,000 and 20 years of monthly payments remaining. The annual interest rate on the loan is 4% How many years early will you be able to pay off the loan?

Answer 1

Answer:

120 months or 10 years earlier

Explanation:

The computation of the number of years early would pay off the loan is  shown below:

By using the financial calculator

RATE = 4% ÷ 12

P V = $50,000

PMT= -$203.24 - $302.99

FV = 0

CPT N=120

Now for extra payment it would take 120 months

And without extra payment it would take

= 20 × 12

= 240 months  

So either 120 months or 10 years earlier