# Loan Question...

Discussion in 'Archived Threads 2001-2004' started by David-S, Nov 19, 2002.

1. ### David-S Second Unit

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Hey, I'm helping my girlfriend figure out her student loans, and I have a question (never paid attention to the interest parts of math classes..)

Assuming the same interest rate, there's no \$\$ difference in taking out a 10 year loan, and taking out a 15 year loan (but making the same payments as a 10 year loan) if the bank just lets you finish paying early, right? Or am i wrong, and if possible, should she go for the shorter term?

Thanks! (any sites w/ a decent calculator for this type of stuff?)

2. ### Joel Mack Cinematographer

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You'd have to check with the lender to see if there's a penalty for paying the loan off early...

3. ### David-S Second Unit

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but if there isn't it'd be the same?

I wasn't sure, because the payment showed off paying off the interest first, so i figured the longer term would "cost" more, even though you paid it off in the same term...

4. ### Kevin P Screenwriter

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With no prepayment penalties, paying off a longer term loan in a shorter term (w/the same payments as the shorter term loan) will cost you the same as the shorter term loan, assuming the interest rates are the same.

Interest is credited first, but it's calculated on the outstanding balance, so if you pay the balance down sooner, the less interest you pay over the term of the loan.

Plus, with taking out a 15 year (or longer) loan and paying it off as a 10 year loan, you have some flexibility, say if you have some difficult times and need to revert to the lower 15 year payment for a few months, you can do so. With a 10 year loan, you're stuck with the 10 year payments.

KJP

5. ### David-S Second Unit

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Great, that's what i thought, but I just wanted to make sure.. appreciate your help!

dave