Loan Payoff (Extra Payment) Calculator
See how much faster you clear a loan and how much interest you save by adding an extra amount to every monthly payment.
How it works
Scheduled payment = amortized payment on balance · Each month: interest = balance × rate ÷ 12, then balance = balance + interest − (payment + extra) · Repeat until balance = 0
Every extra dollar you add goes straight against principal, so it skips all the future interest that dollar would otherwise have accrued. Because interest compounds on the remaining balance, the effect snowballs — the earlier and larger the extra payments, the more dramatic the time and interest savings. This is the single most reliable way to beat a loan without refinancing, and it works on mortgages, auto loans and student loans alike.
Worked example
On a $250,000 balance at 6.5% with 30 years left, the scheduled payment is about $1,580. Paying an extra $200 (a $1,780 total) clears the loan in roughly 24 years instead of 30 — about 6 years sooner — and saves on the order of $70,000 in interest.
Frequently asked questions
Where should I send the extra payment?
Make sure the lender applies it to principal, not to next month’s payment or to escrow. Many servicers have a “principal only” option online; if not, note it on the check or in the payment memo, then verify the balance dropped by the extra amount.
Is it better to pay extra or invest the money?
Compare your loan rate to what you could reliably earn after tax. Paying down a 6.5% loan is a guaranteed 6.5% return, which is hard to beat safely — but if your rate is very low, investing the difference may come out ahead over long horizons. Many people do a mix.
Are there prepayment penalties?
Most mortgages and consumer loans allow extra payments with no penalty, but some loans charge a fee for paying off early within the first few years. Check your loan agreement for a prepayment-penalty clause before committing to an aggressive payoff plan.
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This is an educational estimate, not financial advice. Lenders use their own rounding, fees, mortgage-insurance rules and credit terms — confirm exact figures with your lender or a licensed advisor.