Questions about paying off a loan

[Hoeboy]

I took out a loan from Dell to buy a laptop and I'm planning to pay if off in a few months, instead of 48 months. On the monthly statement they send me, below the principle amount, it said "this is the principle amount, not the payoff balance." What does that mean? I assume if I write a big check for the principle amount that I'd be done with paying off the loan? Or does that mean if I pay off the principle balance, I'd still have to make payments for 48 months? That seems pretty ludicrous.

 

[Yo Ma Ma]

Payoff amount would be equal to principle + interest. It depends on the wording of your loan agreement if the interest will be pro-rated and provide a savings to you for paying off early.

 

[dman]

Assuming there is no penalty for early payment, then the principle amount is ALMOST the amount remaining. If you sent a check for that amount, however, there'd still be a little interest left over due to compounding and other factors. The next month you'd still have a small payment to make. You could then pay that off and be done with the loan... but:

IF you call the bank that's providing the loan they can usually tell you the payoff amount for the current month. That is the amount you would pay plus interest for that month to payoff the loan.

Thus, if there are no penalties than you would NOT have to keep paying for 48 months. If there are penalties, you'd have to read the contract to understand what you are faced with. You could still pay it off early but you'd be responsible for any interest and other penalties they would charge.