moneycalc

Loan Payoff Calculator

See how extra payments speed up your debt payoff and save you money on interest.

Loan Details

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Additional amount above minimum

Payoff Comparison

3y 10m
with extra payments
Without Extra Payments4y 11m
Total Interest (original)$3,388
With Extra Payments3y 10m
Total Interest (new)$2,602
Time Saved1y 1m
Interest Saved$785

Paying an extra $100/month saves you $785 in interest and pays off your loan 1y 1m sooner.

How Extra Payments Accelerate Loan Payoff

When you make extra payments on a loan, the entire extra amount goes directly toward reducing the principal balance. Since interest is calculated on the remaining balance, a lower principal means less interest charged each month. This creates a compounding effect: each extra payment reduces future interest, which in turn reduces the payoff timeline even further.

Even modest extra payments can have a dramatic impact. On a $20,000 loan at 6.5% over 5 years, paying just $100 extra per month can save you over $800 in interest and pay off the loan nearly a year earlier.

Frequently Asked Questions

Should I make extra payments or invest the money instead?

Compare your loan interest rate to your expected investment return. If your loan charges 7% and you expect 10% from investing, investing may come out ahead mathematically. However, paying off debt provides a guaranteed "return" equal to the interest rate, while investments carry risk. Many financial advisors recommend paying off high-interest debt (above 6-7%) first and investing extra funds when rates are lower.

Is there a penalty for paying off a loan early?

Some loans include prepayment penalties, especially certain mortgages and auto loans. Federal student loans and most personal loans do not have prepayment penalties. Always check your loan agreement before making extra payments. If there is a penalty, calculate whether the interest savings still outweigh the penalty cost.

Should I pay extra on the loan with the highest balance or highest rate?

Mathematically, targeting the highest interest rate loan first (the "avalanche method") saves the most money. However, paying off the smallest balance first (the "snowball method") provides psychological wins that keep many people motivated. Both strategies are effective. The best approach is whichever one you will consistently stick with.