Early Payoff Savings Calculator
Discover how much interest you save and how many months sooner you'll be debt-free when you make extra payments on any loan or credit card with a fixed rate and balance.
About this calculator
The calculator compares two payoff scenarios using the standard loan payoff formula: n = -log(1 − (balance × r / payment)) / log(1 + r), where r = loanRate / 100 / 12. First it solves for n₁ using your current payment, then for n₂ using currentPayment + extraPaymentAmount × extraPaymentFreq. Total interest in each scenario is simply (payment × n) − balance. The savings = (currentPayment × n₁ − balance) − ((currentPayment + extra) × n₂ − balance). Because interest compounds on the declining balance, extra payments made early in the loan have an outsized effect — every dollar of extra principal eliminates months of future interest charges that would have compounded on that dollar.
How to use
Say you owe $15,000 on a car loan at 7% APR, currently paying $350/month, and want to add $100/month extra. r = 0.07/12 ≈ 0.005833. n₁ = -log(1 − 15000 × 0.005833 / 350) / log(1.005833) = -log(1 − 0.25) / 0.005817 = -log(0.75) / 0.005817 = 0.2877 / 0.005817 ≈ 49.5 → 50 months. n₂ = -log(1 − 87.50/450) / 0.005817 = -log(0.8056) / 0.005817 = 0.2163 / 0.005817 ≈ 37.2 → 38 months. Interest saved = (350×50 − 15000) − (450×38 − 15000) = 2,500 − 2,100 = $400 saved, and you finish 12 months earlier.
Frequently asked questions
How much money can I save by making one extra loan payment per year?
Making one extra payment per year effectively adds a full month's principal reduction annually, which can shave years off a long-term loan. On a 30-year mortgage of $250,000 at 6%, one extra payment per year reduces the term by roughly 4–5 years and saves approximately $40,000–$50,000 in interest. The savings are larger on higher-rate or longer-term loans. You can apply the extra payment as a lump sum once a year, or divide it by 12 and add that amount to each monthly payment — both strategies produce similar results.
What is the best frequency for making extra loan payments to maximize savings?
More frequent extra payments produce slightly better results because each payment reduces the balance sooner, cutting the interest that accrues before the next scheduled payment. Monthly extra payments outperform a single annual lump sum of the same total amount, though the difference is modest on most consumer loans. The most important factor is consistency — a reliable extra $50/month every month beats an irregular $600 payment you may or may not make once a year. This calculator lets you model different frequencies so you can see the exact impact of each approach.
Should I make extra loan payments or invest the money instead?
The decision depends on comparing your loan's after-tax interest rate against the expected after-tax return on your investments. If your loan charges 7% interest and your investment portfolio earns 10% annually, investing wins mathematically — but the loan return is guaranteed while investment returns are not. High-interest debt (credit cards at 20%+) almost always favors paying down debt first, since it is very difficult to beat a risk-free 20% return in any market. Low-rate loans (3–4%) often favor investing, especially when the loan interest is tax-deductible. Many financial planners recommend splitting extra cash between both goals to balance risk and guaranteed savings.