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Step 1
Determine the length (term of the loan) by dividing the full loan amount by the minimum required rmonthly payment. For example: The loan amount is $5,000 and the monthly payment is $150. 5000 divided by 150 = 33 monthly payments.
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Step 2
Determine the actual amount of money needed to pay back the principal. Divide the principal by the number of months given to pay back the loan. For instance, if your total loan amount, including attached costs and interest was $5,000 and you actually received $4,200 your calculation would be 4200 divided by 33 months = $127. This means that interest and other costs of $23 per month are coming out of your $150 payment.
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Step 3
Shorten the term of the loan and reduce interest charges by making larger monthly payments, which will reduce the principal balance quicker. This will reduce your interest costs since interest is calculated based on the current principal balance. As an experiment, try increasing your monthly payment by an amount you are comfortable with, then divide that new payment amount into the current loan balance. This answer will give you a new payoff date in terms of months. You will save interest on the loan as you will not be keeping the principal as long.
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Step 4
Assume that most, if not all loans will have additional closing costs to compensate for credit reports, underwriting and other administrative costs which are normally financed right in to the loan. You are paying interest on the cost of this money as well. It is usually your option--but not normally presented to you--to pay these costs upfront and not finance them into your loan. By paying these costs up front, you will have a lower APR (Annual Percentage Rate).
