1. What Is Principal Curtailment?

Principal curtailment refers to making extra payments toward the principal balance of a loan, which reduces the outstanding principal amount and can lead to significant interest savings over the life of the loan.

2. How Does The Calculator Work?

The calculator uses a simple formula:

Where:

• \( Original\ Principal \) — The initial loan balance before curtailment
• \( Curtailment\ Amount \) — The additional payment applied to the principal
• \( New\ Principal \) — The remaining principal balance after curtailment

Explanation: This calculation helps borrowers understand how additional payments reduce their principal balance, potentially shortening the loan term and reducing total interest paid.

3. Benefits Of Principal Curtailment

Details: Making principal curtailment payments can significantly reduce the total interest paid over the life of the loan, help pay off the loan faster, and improve debt-to-income ratios.

4. Using The Calculator

Tips: Enter the original principal amount and the curtailment amount in dollars. Both values must be positive numbers, and the curtailment amount should not exceed the original principal.

5. Frequently Asked Questions (FAQ)

Q1: What is the difference between principal curtailment and regular payments?
A: Regular payments cover both interest and principal according to the amortization schedule, while principal curtailment is an extra payment applied directly to reduce the principal balance.

Q2: How does principal curtailment affect loan term?
A: Principal curtailment reduces the outstanding balance, which can shorten the loan term and reduce the total interest paid over the life of the loan.

Q3: Are there any penalties for making principal curtailment payments?
A: This depends on the loan terms. Some loans may have prepayment penalties, so it's important to check with your lender before making extra payments.

Q4: How often can I make principal curtailment payments?
A: This varies by lender. Some allow additional payments at any time, while others may have specific rules or limitations.

Q5: Should I prioritize principal curtailment over other financial goals?
A: This depends on your overall financial situation. Generally, it's wise to balance debt repayment with saving for emergencies and retirement.