Should I focus on paying off this loan early or invest extra money?

Prepaying a loan gives you a risk-free return equal to the loan’s interest rate, while investing can offer higher potential returns but with risk. The best choice depends on your interest rate, risk tolerance, other debts, and financial goals. This calculator helps quantify the loan side so you can compare against your investing expectations.

Can I use this for credit cards or lines of credit?

This tool assumes a fixed-rate amortizing loan with a fixed payment schedule. Credit cards and lines of credit typically have variable balances and rates, so their payoff dynamics are more complex. You can still get a rough idea if you treat your card like a fixed loan with a freeze on new charges, but results will be approximate.

What happens if I skip an extra payment one month?

The calculator assumes you make the same extra payment every month until payoff. In reality, skipping or changing extra amounts will alter the payoff time and savings. If you anticipate irregular extra payments, you may want a more flexible model or to rerun the calculator with updated assumptions.

Does this calculator account for prepayment penalties?

No. If your loan charges prepayment penalties, those costs are not included in the interest-savings estimate. Always check your loan documents or talk with your lender to understand any penalties before committing to an aggressive prepayment plan.

Do extra payments change my required minimum payment?

Usually not. For many standard loans, making an extra payment reduces your principal and payoff time but does not lower the required payment amount unless you refinance or formally recast the loan. This calculator assumes your base payment stays the same while extra payments are purely optional.

everyday calculator

Loan Early Payoff Savings Calculator

Estimate payoff time and interest saved with extra monthly payments.

Results

Base monthly payment: $1,199 USD
Payoff time with extra (months): 252.00
Interest saved (est.): $79,103 USD

How to use this calculator

Enter your current loan balance (the principal you still owe), the annual interest rate (APR), and the remaining term in months.
Enter the extra monthly payment you are considering—this is the additional amount you plan to send with every monthly payment on top of the required amount.
The calculator computes your base monthly payment and simulates an amortization schedule with the extra payment applied each month.
Review the payoff time with extra payments (in months) and compare it to your original term to see how much earlier you would be debt-free.
Review the estimated interest saved. Experiment with different extra-payment amounts until you find a plan that fits your budget and payoff goals.

Inputs explained

Loan balance: The current principal you owe on the loan today. For a mortgage, this is your remaining principal balance; for an auto or personal loan, it’s your outstanding balance from your most recent statement.
Interest rate (APR): The annual percentage rate on your loan, expressed as a percentage (for example, 6 or 5.5). We convert this to a monthly rate to calculate both the standard payment and simulated interest.
Term (months): The number of months left on the loan if you were to make only the required payments and no extras. For a new 30-year loan, this would be 360; for a loan with 10 years remaining, 120.
Extra payment (monthly): The additional amount you intend to pay toward principal every month. This is on top of your regular payment. For example, if your base payment is $1,200 and you enter $200 here, your total payment becomes $1,400.

How it works

We start by calculating the standard fixed monthly payment based on your loan balance, annual interest rate (APR), and remaining term in months using the standard amortization formula.

From that, we generate a baseline scenario where you make only the required payment every month until the loan is fully paid. We track how many months it takes and how much total interest you pay over the life of the loan.

Next, we simulate an early payoff scenario where you make the regular monthly payment plus a fixed extra amount every month. Each extra dollar is applied directly to principal, which reduces the balance faster and lowers interest charges going forward.

In the extra-payment scenario, the loan pays off earlier because principal is shrinking faster than scheduled. We track the new payoff month and recompute total interest paid.

Finally, we estimate interest savings as the difference between total interest in the baseline scenario and total interest in the extra-payment scenario. The calculator reports your base payment, payoff time with extra, and the approximate interest saved.

Formula

Standard monthly payment for a fixed-rate loan:\nMonthly rate r = APR ÷ 12\nTerm N = Term (months)\nBase payment = Balance × [r(1 + r)^N] ÷ [(1 + r)^N − 1]\n\nWith extra payments, each month:\nInterest = Current balance × r\nPrincipal (base) = Base payment − Interest\nPrincipal with extra = Principal (base) + Extra payment\nNew balance = Current balance − Principal with extra\nRepeat until balance ≤ 0; sum interest across months for total interest with extra.

When to use it

Planning an extra payment strategy for a mortgage to see how dropping an extra $100–$300 per month changes your payoff date and interest cost.
Comparing different extra-payment levels (for example, $50 vs $200) to decide what fits your budget while still meaningfully accelerating payoff.
Estimating the payoff impact of reallocating money from a finished car loan toward extra payments on a remaining mortgage or student loan.
Visualizing how much faster you can be out of debt if you dedicate a portion of bonuses, raises, or side-gig income to fixed monthly extra payments.
Providing a quick payoff summary when discussing debt strategies with a spouse, advisor, or accountability partner.

Tips & cautions

Even modest extra payments can have a big effect over long terms. Try increasing your payment by an amount you won’t miss—for example, the cost of one dinner out per month—and see how many years you shave off your loan.
Check your loan agreement for prepayment policies. Most modern mortgages and standard loans allow extra principal payments without penalty, but some loans have restrictions or prepayment penalties.
If you receive a raise or pay off another debt, consider redirecting part of that freed-up cash into extra payments to accelerate your payoff without feeling a pinch in your existing budget.
Make sure your lender applies any extra payment to principal and not future interest or escrow. Many online portals let you specify “apply to principal only” for additional amounts.
Balance prepayments against other goals: it often makes sense to pay off high-interest debt first and maintain an adequate emergency fund before aggressively prepaying low-rate loans.
Assumes a fixed interest rate and standard amortizing payments. Adjustable-rate loans, interest-only loans, and lines of credit may behave differently when extra payments are applied.
Models a fixed extra payment each month; it does not support variable extra amounts, skipping months, or one-time lump-sum payments within the same run.
Does not include taxes, insurance, fees, or escrow; it focuses solely on principal and interest when estimating payments and savings.
Assumes payments are made on time and in full each month. Late or partial payments, fees, and changes in interest rate are not modeled.
Provides approximate interest savings and payoff timing; exact numbers from your lender may differ due to specific day-count conventions, rounding, and servicing rules.

Worked examples

Example 1: $200,000 balance at 6% with 360 months remaining and $200 extra

Base payoff (no extra) would follow a 30-year schedule with a fixed monthly payment.
Adding $200 extra each month reduces principal faster, shortening payoff by several years.
Total interest paid with extra is tens of thousands of dollars lower than without extra payments.
Interpretation: a fixed $200 extra payment can dramatically accelerate mortgage payoff over a 30-year term.

Example 2: Smaller extra on a shorter-term loan

Balance = $15,000 auto loan, APR = 5.5%, term = 60 months, extra payment = $50 per month.
The extra $50 shortens the payoff timeline by several months and reduces interest by a few hundred dollars.
Interpretation: even on shorter-term loans, consistent extra payments produce noticeable savings, especially when started early.

Example 3: Testing two extra-payment strategies

Run the calculator once with an extra payment of $100 per month and note payoff time and interest saved.
Run it again with an extra payment of $300 per month.
Compare how much additional interest you save and how many more months you shave off the term by tripling the extra payment.
Interpretation: the relationship between extra payment size and savings is not perfectly linear, but larger extras typically have a disproportionately strong effect on long-term loans.

Deep dive

Use this loan early payoff savings calculator to see how much faster you can pay off a mortgage, auto loan, or personal loan by adding a fixed extra payment each month. Enter your current balance, APR, remaining term, and extra payment to get your base monthly payment, new payoff time, and estimated interest saved.

The tool is ideal for borrowers who want to test payoff strategies before committing. Experiment with different extra-payment amounts, see their impact on payoff dates and total interest, and use the results to design a plan that fits your budget and long-term goals.

FAQs

Should I focus on paying off this loan early or invest extra money?: Prepaying a loan gives you a risk-free return equal to the loan’s interest rate, while investing can offer higher potential returns but with risk. The best choice depends on your interest rate, risk tolerance, other debts, and financial goals. This calculator helps quantify the loan side so you can compare against your investing expectations.
Can I use this for credit cards or lines of credit?: This tool assumes a fixed-rate amortizing loan with a fixed payment schedule. Credit cards and lines of credit typically have variable balances and rates, so their payoff dynamics are more complex. You can still get a rough idea if you treat your card like a fixed loan with a freeze on new charges, but results will be approximate.
What happens if I skip an extra payment one month?: The calculator assumes you make the same extra payment every month until payoff. In reality, skipping or changing extra amounts will alter the payoff time and savings. If you anticipate irregular extra payments, you may want a more flexible model or to rerun the calculator with updated assumptions.
Does this calculator account for prepayment penalties?: No. If your loan charges prepayment penalties, those costs are not included in the interest-savings estimate. Always check your loan documents or talk with your lender to understand any penalties before committing to an aggressive prepayment plan.
Do extra payments change my required minimum payment?: Usually not. For many standard loans, making an extra payment reduces your principal and payoff time but does not lower the required payment amount unless you refinance or formally recast the loan. This calculator assumes your base payment stays the same while extra payments are purely optional.

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This loan early payoff savings calculator provides approximate estimates of payments, payoff timing, and interest savings based on user-entered values and a simplified amortization model. It is not a loan offer, does not incorporate all lender-specific rules, and is not financial advice. Actual results may vary due to prepayment policies, rate changes, fees, and payment timing. Review official loan disclosures and consult with your lender or a qualified financial professional before making major prepayment decisions.