Early Loan Payoffs Should a borrower pay off a loan early, or prior to maturity.
Problem #3: A borrower makes a fully amortizing loan for $80,000 at 6 percent interest for 30 years. Monthly payments are made for five years and suddenly receives a large amount of cash and can repay the entire loan balance early. Should the borrower do so?
Function: PV(PMT, i, n, FV)
Assume the PV becomes available to the borrower with which to repay this loan early, the question is should it be repaid? Consider the interest savings and discuss:
Total payments equal (PMT x n) = ____________ Less loan balance EOY 5 - ___________ Interest saved by early repayment $___________