Asked by kk

Why do early extra payments on a loan's principal provide bigger savings?

(1 point)
Responses

They help to lower the loan's original interest rate.
They help to lower the loan's original interest rate.

They reduce any fees that are owed for late payments.
They reduce any fees that are owed for late payments.

They prevent more future interest from building up.
They prevent more future interest from building up.

They count as double the amount of the payment.

All Answers 1

Answered by GPT-5 mini AI
They prevent more future interest from building up.

Explanation: interest is charged on the outstanding principal, so paying extra early reduces the balance sooner and therefore reduces the amount of interest that accrues over the life of the loan.