How this calculator works
Works for any fixed-rate installment loan: personal, student, auto, boat or a home equity loan. Your regular payment comes from the balance, rate and months left. Every extra dollar goes straight to principal, so the next month's interest is smaller and the loan ends early. The amortization table compares the balance at the end of each year with and without the extra payment.
- Regular payment = balance × r × (1 + r)^n ÷ ((1 + r)^n − 1), where r = APR ÷ 12 and n = months left.
- Each month: interest = balance × r, then the payment plus the extra comes off. A one-time extra payment comes off the balance first.
- Interest saved = interest at the regular payment − interest with the extra payments.
Worked example
With these inputs: loan balance $20,000; interest rate 7%; months left on the loan 60; extra payment each month $100; one-time extra payment now $0.
The result is interest saved $893.72, with paid off 1 year 1 month sooner and new payoff time 3 years 11 months. Ask the lender to apply the extra to principal (some apply it to next month's payment instead), and check the loan has no prepayment penalty.
Reading the amortization table
Each row is the balance at the end of a loan year. On the example, after year 1 the balance is $16,538.04 at the regular payment but $15,298.78 with $100 extra; by year 4 the extra has paid the loan off while the regular schedule still owes $4,576.90. The last column is the interest saved so far.
Early payments are mostly interest and later ones mostly principal, which is why an extra payment early in the loan saves more than the same amount near the end.
Monthly extra vs a one-time payment
Both cut interest because both lower the balance the interest is charged on. On the example loan, a one-time $2,000 payment and no monthly extra pays it off 7 months sooner; $200 a month saves $1,438.78 and finishes 1 year 10 months early. Try both in the calculator to see which fits your budget.
Set the extra up as its own monthly bill so it happens every month, and ask the lender to apply it to principal. Check for a prepayment penalty first; most personal, student and auto loans don't charge one.
Which loan to pay extra on first
Put extra money on the highest-rate debt first. The debt snowball and avalanche calculator orders several debts for you, and the credit card payoff calculator handles cards, which have no fixed term. For an auto loan with the balance and payment from your statement, the car loan payoff calculator also estimates the payoff amount.
For a home loan, use the early mortgage payoff calculator or the biweekly mortgage calculator in our mortgage section; they handle the escrow part of a mortgage payment.
Sources
Frequently asked questions
How do extra payments shorten a loan?
Every extra dollar goes to principal, so the next month's interest is smaller and more of each regular payment pays down the balance. A $20,000 loan at 7% with 60 months left ends 13 months early with $100 extra a month.
How much interest does an extra payment save?
It depends on the rate, the balance and how early you pay. On $20,000 at 7% over 60 months, $100 extra a month saves $893.72 and $200 a month saves $1,438.78.
Is it better to make one extra payment a year or pay extra monthly?
Paying monthly saves a little more, because each extra dollar starts cutting interest sooner. What matters most is how much extra you pay in total and how early in the loan you pay it.
Can I use this for a student loan or personal loan?
Yes. It works for any fixed-rate installment loan: enter the balance, rate and months left from your statement.
Do lenders charge for paying a loan off early?
Some do, through a prepayment penalty written into the contract. Most personal, student and auto loans don't have one, but check before you pay extra.