Loan Payoff Calculator

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Loan Payoff Calculator
Calculate Interest Savings & Time Saved
Results:
Please enter your loan details and click Calculate.
function calculatePayoff(){var balance=parseFloat(document.getElementById('balance').value);var annualRate=parseFloat(document.getElementById('rate').value);var currentPayment=parseFloat(document.getElementById('payment').value);var extraPayment=parseFloat(document.getElementById('extra').value);if(isNaN(balance)||isNaN(annualRate)||isNaN(currentPayment)||isNaN(extraPayment)){alert('Please enter valid numeric values.');return;}var monthlyRate=annualRate/100/12;if(monthlyRate*balance>=currentPayment){alert('Warning: Your current monthly payment is not enough to cover the interest. The loan balance will never reach zero.');return;}var n_std=-Math.log(1-(monthlyRate*balance)/currentPayment)/Math.log(1+monthlyRate);var total_std=n_std*currentPayment;var interest_std=total_std-balance;var newPayment=currentPayment+extraPayment;var n_acc=-Math.log(1-(monthlyRate*balance)/newPayment)/Math.log(1+monthlyRate);var total_acc=n_acc*newPayment;var interest_acc=total_acc-balance;var monthsSaved=n_std-n_acc;var interestSaved=interest_std-interest_acc;var resultHTML='
';resultHTML+='

Time Saved: '+monthsSaved.toFixed(1)+' Months ('+(monthsSaved/12).toFixed(1)+' Years)

';resultHTML+='

Total Interest Saved: $'+interestSaved.toLocaleString(undefined,{minimumFractionDigits:2,maximumFractionDigits:2})+'

';resultHTML+='

New Total Interest: $'+interest_acc.toLocaleString(undefined,{minimumFractionDigits:2,maximumFractionDigits:2})+'

';resultHTML+='

New Payoff Time: '+n_acc.toFixed(1)+' Months

';resultHTML+='
';if(document.getElementById('steps').checked){resultHTML+='
';resultHTML+='
';resultHTML+='

Standard Interest: $'+interest_std.toFixed(2)+'

';resultHTML+='

Standard Payoff: '+n_std.toFixed(1)+' months

';resultHTML+='
';}document.getElementById('answer').innerHTML=resultHTML;}

Using the Loan Payoff Calculator

The loan payoff calculator is an essential financial tool designed to help you visualize how additional monthly payments can drastically shorten your loan term and reduce the total interest paid. Whether you are managing a car loan, a personal loan, or a student debt, understanding the impact of even a small extra contribution can empower you to become debt-free sooner.

Remaining Loan Balance
The current amount you owe on your loan. You can find this on your most recent monthly statement or by logging into your lender's portal.
Annual Interest Rate
The interest rate charged by your lender, expressed as a yearly percentage (APR).
Monthly Payment Amount
Your scheduled monthly installment, including principal and interest (exclude taxes or insurance if applicable).
Extra Monthly Payment
The additional amount you plan to contribute each month toward the principal balance.

How It Works

When you make a standard loan payment, the bank first applies a portion of that money to the interest accrued during the month. The remainder goes toward reducing the principal balance. By adding an "Extra Monthly Payment," 100% of that extra amount typically goes directly to the principal. This reduces the balance faster, which in turn reduces the amount of interest that can accrue in the following months.

The calculator uses the NPER (Number of Periods) formula to solve for time:

n = -log(1 – (i * P) / A) / log(1 + i)

  • n = total number of months
  • i = monthly interest rate (annual rate / 12)
  • P = current loan balance
  • A = total monthly payment amount (standard + extra)

Loan Payoff Example

Scenario: Imagine you have a $20,000 car loan with a 7% interest rate and a monthly payment of $400. You decide to pay an extra $100 every month.

Step-by-step solution:

  1. Initial Balance: $20,000
  2. Interest Rate: 7% (0.07 / 12 = 0.00583 monthly)
  3. Standard Payment: $400
  4. Accelerated Payment: $500 ($400 + $100 extra)
  5. Standard Payoff Time: ~60 months
  6. New Payoff Time: ~46 months
  7. Result: You save 14 months of payments and roughly $950 in interest charges.

Common Questions

Will my bank allow extra payments?

Most modern personal, auto, and student loans allow for penalty-free prepayments. However, some older or "subprime" loans might have prepayment penalties. Always check your loan agreement or contact your lender to ensure extra payments are applied directly to the principal balance.

Is it better to pay extra monthly or in a lump sum?

Generally, the earlier you pay down the principal, the more interest you save. A lump sum payment made at the beginning of the loan is more effective than the same amount spread over monthly payments. However, a consistent extra monthly payment is often more manageable for most household budgets and still results in significant savings.

Does this calculator work for mortgages?

Yes, this loan payoff calculator works for mortgages as long as you are looking at the principal and interest portion of your payment. Keep in mind that mortgage payments often include escrow for taxes and insurance, which do not contribute to paying off the loan balance.

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