Loan Payoff & Extra Payment Calculator
See how much time and interest you can save by paying more than the minimum.
Payoff Summary
How Extra Payments Accelerate Debt Freedom
When you make a standard loan payment, a portion goes toward the interest owed for that month, and the remainder reduces your principal balance. By adding an extra monthly payment, 100% of that additional money goes directly toward reducing the principal.
This creates a compounding effect: because your principal balance drops faster, you accrue less interest in the following months. This "snowball" effect can shave years off a mortgage or car loan and save you thousands of dollars in interest charges.
Example Calculation
Imagine you have a $20,000 car loan at a 6% interest rate with a monthly payment of $350. Normally, it would take you roughly 68 months to pay it off, costing you $3,663 in total interest.
If you add just $100 extra per month (totaling $450):
- You pay the loan off in 51 months instead of 68.
- You save 17 months of payments.
- You save $948 in interest.
Frequently Asked Questions
Is there a penalty for paying off a loan early?
Most modern consumer loans (auto, mortgage, personal) do not have prepayment penalties, but you should always check your specific loan agreement before making large extra payments.
Should I pay off debt or invest?
A common rule of thumb is that if your loan's interest rate is higher than the expected return on an investment (typically 7-8% for the stock market), paying off the debt is the better "guaranteed" return.