1. Early Payoff of Loans

2. Payment is first applied to interest owed. Then,the balance is used to reduce the principal. 1. Find the simple interest due from the date the loan was made until the date the partial payment is made. (I = PRT) 2. Subtract this interest from the amount of the payment. 3. Any difference is used to reduce the principal.

3. 4. Treat additional partial payments in the same way, always finding interest on only the unpaid balance after the last partial payment. 5. The remaining principal plus interest on this unpaid principal is then due on the due date of the loan.

4. A 200-day note, signed on April 7 for $48,300, has a rate of 9% compounded annually. A payment of $12,000 was made on June 25. (A) Find the balance owed on the principal on June 25 and (B) Find the amount due at maturity.

5.  A 120-day note has a face value of $7500 and a rate of 11.5%. A partial payment of $1700 is made after 40 days.  A) Find the balance owed on the principal after the partial payment.  B) Find the amount due at maturity.

6.  Allows a lender to earn more of the finance charge during the early months of the loan.  The borrower pays more interest in the early months, so if they pay off the loan early, more interest is paid.  The portion of the finance charge that has not yet been earned by the lender is called the UNEARNED INTEREST.

7. U = F x N x (1 + N) P (1 + P) U = unearned interest N = # of payments remaining P = original # of payments F = finance charge

8. Simplot Maps has a signed note with a face value of $24,000 that requires 20 monthly payments of $1307.76. The manager pays the debt in full after 12 payments. A) Find the finance charge B) Find the amount of unearned interest C) Find the amount needed to repay the loan in full using the Rule of 78

9. Tim O’Murphy borrows $2100 to buy a riding lawn mower and agrees to make 12 monthly payments of $186.58 each. He pays the debt in full after 6 months. A) Find the finance charge B) Find the amount of unearned interest C) Find the amount needed to repay the loan in full using the Rule of 78.