I discovered today that a loan I took out for home improvements doesn't use simple interest. I'm pretty frustrated with myself for not realizing this before I signed for it. Regardless, I'm trying to figure out if paying more than my minimum monthly payment (in an effort to save interest) is worth it.
It's a 15 year loan at 13.99%. My monthly payment is $195.80 and the amount financed is $13,900. I've made 22 payments so far. Here's what my contract says with regards to prepayment:
Buyer can prepay any amounts due under this Contract at any time. If Buyer prepays this Contract in full, Seller will refund the UNEARNED FINANCE CHARGE figured by the Rule of 78ths method if the term of this Contract is 61 months or less, and by the Actuarial Method if the term is over 61 months. Seller or holder may retain an acquisition charge of $10. No refunds will be less than $1.
So, are partial pre-payments worth it?