Enter your regular payment details and any extra contributions into the calculator to determine the accelerated payment plan.
Accelerated Payment Formula
The following equation is used to calculate the Accelerated Payment.
AP = RP + A
- Where AP is the accelerated payment ($/month)
- RP is the regular monthly payment ($/month)
- A is the additional monthly amount ($/month)
To calculate the accelerated payment, simply add the additional amount to your regular monthly payment.
What is an Accelerated Payment?
Definition:
An accelerated payment is an additional or larger payment made on a loan or mortgage to reduce the principal balance more quickly. This helps decrease overall interest costs and shortens the repayment period.
How to Calculate Accelerated Payment?
Example Problem:
The following example outlines the steps and information needed to calculate the Accelerated Payment.
First, determine your regular monthly payment. In this example, let’s say your existing monthly payment is $1,000.
Next, determine the extra amount you plan to pay every month. Here, we choose an additional $200.
Finally, calculate the accelerated payment using the formula above:
AP = RP + A
AP = $1,000 + $200
AP = $1,200 / month
FAQ
How does an accelerated payment plan save me money?
By making larger or additional payments, you reduce the amount of principal owed faster, which decreases the overall interest charged over the life of the loan and shortens the repayment schedule.
Can I make accelerated payments on any type of loan?
Most common loan types, including mortgages, auto loans, and personal loans, allow you to make extra or larger payments. Always check your loan agreement or consult with your lender to confirm their policy on prepayments and any associated fees.
Is it more effective to make an extra payment monthly or a large lump-sum payment periodically?
Either method can help reduce your loan balance faster. However, making extra monthly payments consistently might better reduce the long-term interest costs and provide a clearer path to accelerated debt repayment.