Loan Extra Payment Calculator

How it works

Your scheduled payment is fixed by the loan amount, rate and term. Each month, interest is charged on the balance you still owe and the rest of the payment reduces the balance. Any extra you pay goes entirely to principal, so the next month's interest is charged on a smaller balance, and more of every later payment goes to principal as well.

The calculator runs the loan month by month twice: once as scheduled, and once with your extra payments applied on top of the regular payment. It counts how many payments each version takes and adds up the interest. The difference is the interest you save and the time you cut.

You can combine an extra amount every month, a single lump sum with a chosen payment, and an extra amount once a year. Money paid early saves the most, because it stops interest accruing for the rest of the loan.

Formula

r = annual rate ÷ 12 ÷ 100        n = term in months
M = P × r × (1 + r)^n ÷ ((1 + r)^n − 1)
each month k:  interest_k = B × r
               B = B + interest_k − M − extra_k     (extra capped at what is owed)
extra_k = monthly extra + lump sum (if k is the lump-sum payment) + annual extra (if k is a multiple of 12)
interest saved = Σ interest without extra − Σ interest with extra
monthly extra only: months = ⌈−ln(1 − P × r ÷ (M + extra)) ÷ ln(1 + r)⌉

Example

A $200,000 loan at 6% for 30 years has a scheduled payment of $1,199.10 and costs $231,676.38 in interest over 360 payments. Paying $100 extra every month clears it in 295 payments, 65 months (5 years 5 months) sooner, with total interest of $182,537.97: a saving of $49,138.41 for $29,400 of extra payments (294 × $100; the 295th payment clears the balance on its own).

On the same loan, a single $10,000 lump sum with payment 12 instead saves $41,044.31 and 42 months; $1,200 once a year with every 12th payment (the same yearly total as $100 a month, paid at each year's end) saves $47,309.59 and 63 months.

Assumptions and limitations

• The interest rate is fixed, payments are monthly and interest accrues monthly on the balance; the loan is otherwise a standard fully amortizing loan.
• Extra payments are applied to principal immediately and your scheduled payment stays the same. Some lenders hold extra money or apply it to future payments unless you instruct otherwise; ask yours to apply it to principal.
• Prepayment penalties, fees, escrow, taxes and insurance are not included. Check your loan agreement for a prepayment penalty before paying ahead.
• Paying a loan off early is not always the best use of money; the interest saved here does not compare it with saving, investing or paying down higher-rate debt.
• This is an estimate for planning. It is informational and educational and not financial, tax or legal advice.

Frequently asked questions