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Loan Payoff Calculator
See how extra monthly payments reduce your loan term and save you money on interest.
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Months to Pay Off
Total Interest
Months Saved
Interest Saved
Calculated in your browser. We never see your numbers.
How Extra Payments Work
When you make a loan payment, your lender splits it between interest and principal. In the early months of a loan, most of each payment covers interest — only a small portion reduces the actual balance you owe. By adding extra money on top of your minimum payment, that excess goes straight to principal. A lower principal means less interest accrues next month, so more of your regular payment also attacks the balance. This compounding effect means each extra dollar you pay early in a loan is worth significantly more than a dollar paid near the end.
Loan Payoff Formula
This calculator uses a month-by-month simulation rather than a closed-form formula, which allows it to handle edge cases accurately. Each month, interest is computed as: Interest = Balance × (Annual Rate ÷ 12 ÷ 100). That interest is added to the balance, then your total payment (minimum + extra) is subtracted — capped at the remaining balance so you never "overpay." The simulation runs until the balance reaches zero. Two simulations are run in parallel: one with your minimum payment alone (baseline) and one with the extra payment included. The difference in total months and total interest between the two scenarios gives you "months saved" and "interest saved."
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Frequently Asked Questions
How do extra loan payments save money?
Every extra payment you make goes directly toward reducing your principal balance. Since interest is calculated on the remaining principal each month, a lower balance means less interest charged. Over the life of the loan, paying down principal faster creates a compounding effect — each month's interest charge is smaller, which means more of your minimum payment also goes to principal, accelerating payoff even further.
Should I put extra payments toward principal or as a separate payment?
Most lenders automatically apply any amount above the minimum payment to the principal balance, which is the most effective approach. However, it's worth confirming with your specific lender, as some may require you to explicitly designate extra funds as a principal payment. When in doubt, contact your lender or log into your account portal to ensure extra payments are applied correctly.
What happens if I pay more than the minimum every month?
When you pay more than the minimum, the excess directly reduces your principal balance. This shrinks the amount on which interest is calculated next month, so you pay less interest. This cycle repeats each month, shortening your loan term and reducing the total interest you pay over the life of the loan. Even a small extra payment — $50 or $100 per month — can save hundreds or thousands of dollars in interest.
Can I pay off my loan early without a penalty?
Whether early payoff incurs a penalty depends on your loan agreement and lender. Many personal loans, student loans, and auto loans have no prepayment penalty, allowing you to pay off early at no extra cost. However, some lenders charge a prepayment fee to recoup lost interest income. Always review your loan agreement or contact your lender before making large extra payments to confirm there is no prepayment penalty.
How is the months saved calculated?
Months saved is the difference between your baseline payoff timeline (using only the minimum monthly payment) and your accelerated payoff timeline (minimum payment plus any extra payment you enter). For example, if the minimum payment alone would take 60 months and adding $100 extra reduces that to 48 months, you save 12 months. The same logic applies to interest saved — it's the difference between baseline total interest and accelerated total interest.
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