This graph illustrates the essential elements of Compound interest: Time, Interest Rate, and Amount Borrowed.
As you can see:
- For the first 5 years of this loan, if you were to prepay just $1, you would save more than $5.
- $1 EQUALS $5+
- For the first 20 years of this loan, you would at least DOUBLE YOUR MONEY if you were to make a prepayment.
- $1 EQUALS $2+
To simplify, just think about it like this.
1 EQUALS 5
And it scales. The more you can prepay, the more you will save.
| $1 EQUALS $5 $10 EQUALS $50 $100 EQUALS $500 $1,000 EQUALS $5,000 $10,000 EQUALS $50,000 |