Finance DVC points, make double payments each month?

[BLTtinkerbell]

I’m having a debate with a friend…
Does it make any sense to finance DVC points and then make an additional payment (towards principal) every month until paid off?
Does this actually cut the time in half if you make double payments?
Thoughts?

 

[Cfabar1]

probably not quite in half because some interest would be accruing... but there is not a pre-payment penalty...

 

[DanCali]

If you make double payments you'll actually pay it off in about 1/3 of the time.

If it's a 10 year loan with 15% interest, you'll pay it off in about 40 months with double payments (instead of 120 months).

This happens because with regular payments, most of your monthly payment in the first half of the loan repayment period go to pay off interest. But any additional payments on top of that go to pay off just principal. So with additional payments the interest paid in every subsequent month is lower than in the original schedule and you keep rolling that snowball (reducing interest and increasing principal payments) every month.

In this particular scenario (10 year loan with 15% interest), if you borrow $30K, you'll pay ~$28K in interest over 10 years. But make double payments each month and you only pay ~$8K total in interest while the loan will be paid off in less than 3.5 years!

(see attached amortization tables - you'll probably need to zoom in)

As an aside, I did these tables on my own, but these days you can just go to ChatGPT, Grok, Gemini Claude etc and ask something similar to these 2 questions -

1) $30K loan for 10 years annual interest 15%. What is my monthly payment? (it should say $484)
2) what if I pay $968 every month? when will it be all paid off? how much do I save in interest payments? (it should give you similar info)