Loan Payoff Calculator
See how adding extra to your monthly loan payment cuts the payoff time and the total interest, compared against paying the minimum.
Cómo usar esta calculadora
- 1Enter the loan balance and interest rate.
- 2Enter your current monthly payment.
- 3Enter the extra amount you could add each month.
- 4Read how much sooner the loan is paid off and how much interest you save.
Cómo funciona
Loan payoff with extra payments
each month: interest = balance × (rate ÷ 12) balance = balance + interest − (payment + extra) repeat until the balance reaches zero extra payments go entirely to principal
Paying off a loan faster works by attacking the principal — the outstanding balance — because interest is charged only on what you still owe. Each month, interest accrues on the current balance, and your payment covers that interest first, with whatever remains reducing the principal. When you add an extra amount to the payment, all of it goes toward principal, since the interest due is unchanged. That permanently removes those dollars from the balance, and with them all the future interest they would have accumulated over the remaining life of the loan. The calculator simulates the loan month by month, once at your current payment and once with the extra added, and compares how long each takes to reach zero and how much interest each costs. The difference is the time and money the extra payments save — an amount that is usually far larger than the extra payments themselves, thanks to the interest avoided.
Ejemplo resuelto
A $20,000 loan at 6% with a $400 monthly payment takes about 58 months to clear. Adding $100 a month, for $500 total, pays it off in about 45 months — 13 months sooner — and saves several hundred dollars in interest, because the balance falls faster and accrues less interest along the way.
Loan Payoff Calculator: la guía completa
Why extra payments are so powerful
The reason adding a little extra to a loan payment has an outsized effect comes down to how interest works. Interest is charged on the balance you still owe, so the faster you shrink that balance, the less interest accrues from then on. A normal payment covers the current month's interest and chips away a bit of principal. An extra payment, on top of that, goes entirely to principal — and every dollar of principal you eliminate early erases all the interest that dollar would have generated over the remaining years of the loan.
This creates a compounding benefit that surprises people. A modest extra payment does not just save its own value; it saves that value plus the interest avoided, and it accelerates over time because a smaller balance means smaller interest charges, freeing more of each future payment to attack principal. The effect is strongest early in a loan, when the balance is largest and the interest portion of each payment is highest. This is exactly why financial advice so often emphasises paying a little extra, especially in the early years — the leverage is real and the savings compound.
Time saved versus interest saved
Extra payments deliver two distinct benefits, and it is worth understanding both. The first is a shorter loan: by paying down principal faster, you reach a zero balance sooner, sometimes years earlier. This has value beyond money — it frees up the monthly payment for other uses, removes a financial obligation, and reduces the risk of carrying debt through an uncertain future. Being debt-free earlier is a goal many people value in itself.
The second benefit is the interest saved, which is often the more striking figure. Because you avoid all the interest that would have accrued on the balance you paid down early, the total interest over the life of the loan can drop substantially, frequently by far more than the sum of the extra payments. The calculator shows both: the months cut from the term and the dollars saved in interest. For high-interest debt in particular, the interest saved can be dramatic, which is why paying extra on expensive debt is one of the highest-return uses of spare money — a guaranteed return equal to the loan's interest rate.
When to pay extra, and when not to
Paying extra on a loan is not always the best use of money, and the decision hinges on comparing the loan's interest rate to alternative uses. Paying down a debt is effectively a guaranteed, risk-free return equal to its interest rate — clearing a 20% credit card is like earning 20% with no risk, which almost nothing else can match. So high-interest debt is nearly always worth attacking aggressively. For low-interest debt, like some mortgages, the calculus changes: money invested might earn more over time than the low rate saved by prepaying, so investing instead can leave you better off, albeit with more risk.
There are also practical cautions. Before pouring spare cash into extra loan payments, most advice is to build an emergency fund first, because money locked into a paid-down loan is not easily accessible in a crisis. It is also worth checking that a loan has no prepayment penalty and that extra payments are applied to principal rather than prepaying future scheduled payments. And the psychological dimension matters: some people gain real peace of mind from being debt-free that outweighs a purely mathematical optimisation. The calculator quantifies the financial payoff of paying extra; weighing it against investing, liquidity, and peace of mind turns that number into a decision that fits your whole situation.
Preguntas frecuentes
How much do extra payments save on a loan?
Often far more than the payments themselves, because extra money goes straight to principal and erases all the future interest that balance would have carried. On a $20,000 loan at 6%, adding $100 a month pays it off about 13 months sooner and saves several hundred dollars in interest.
Do extra payments go to principal?
They should, and this calculator assumes so. The regular payment covers the current interest and some principal; the extra amount, added on top, reduces principal entirely. Check with your lender that extra payments are applied to principal, not prepaying future scheduled payments.
Should I pay off my loan early or invest?
Compare the loan's interest rate to expected investment returns. Paying down debt is a guaranteed return equal to its rate, so high-interest debt (like credit cards) is worth clearing first. For low-rate debt, investing might earn more, though with risk. Keep an emergency fund either way.
Why doesn't my balance go down if the payment is too low?
Because the payment must at least cover the monthly interest. If it doesn't, the unpaid interest is added to the balance and the debt grows instead of shrinking — negative amortisation. The payment has to exceed balance times the monthly rate for the loan to ever be paid off.