Early Loan Payoff Calculator
Find out how much interest you save and how many months sooner you'll be debt-free by adding extra money to your monthly loan payment. Useful for mortgages, auto loans, and personal loans.
About this calculator
The number of months needed to pay off a loan is derived by rearranging the amortization formula: n = −ln(1 − B×r / P) / ln(1 + r), where B is the current loan balance, r is the monthly interest rate (annual rate ÷ 12), and P is the monthly payment. Total interest paid = P × n − B. By calculating n and total interest for both your current payment and your current payment plus extra, the difference gives you interest savings and months saved. Adding even a small extra payment each month reduces the balance faster, which reduces the interest accrued each month, creating a compounding benefit that shortens the loan significantly.
How to use
Loan balance: $20,000. Rate: 6% APR (r = 0.005/month). Current payment: $400/month. Extra payment: $100/month. Step 1 — Months at $400: n₁ = −ln(1 − 20,000×0.005/400) / ln(1.005) = −ln(0.75)/ln(1.005) ≈ 57.7 months. Step 2 — Total interest at $400: $400 × 57.7 − $20,000 ≈ $3,080. Step 3 — Months at $500: n₂ = −ln(1 − 20,000×0.005/500) / ln(1.005) = −ln(0.80)/ln(1.005) ≈ 44.7 months. Step 4 — Total interest at $500: $500 × 44.7 − $20,000 ≈ $2,350. Step 5 — Savings: $3,080 − $2,350 = $730 and ~13 months sooner.
Frequently asked questions
How much interest can I save by paying an extra $100 per month on my mortgage?
The savings depend on your loan balance, interest rate, and remaining term, but the impact is substantial. On a $200,000 mortgage at 7% with 25 years remaining, adding $100/month saves approximately $27,000 in total interest and cuts about 4.5 years off the loan. The earlier in the loan term you start making extra payments, the greater the savings, because early payments carry the most interest. Even a one-time lump-sum extra payment produces outsized savings by immediately reducing the interest-bearing principal.
Does it matter if I apply my extra payment to principal directly?
Yes — you should always designate extra payments as 'apply to principal' when instructing your lender. By default, some servicers apply extra funds to the next scheduled payment rather than reducing principal immediately. Reducing principal directly is what lowers the interest charged in subsequent months. Check your loan servicer's policy and confirm via your statement that the extra amount was correctly applied. Many online servicer portals have a specific field or checkbox for this designation.
When is it better to invest extra money rather than pay off debt early?
If your loan's interest rate is lower than the expected return on your investments, investing the extra cash is mathematically better over the long run. For example, if your mortgage rate is 4% and your index fund returns an average of 8%, you come out ahead by investing. However, paying off debt is a guaranteed, risk-free return equal to the loan's interest rate, while investment returns are uncertain. Many financial planners recommend splitting the difference: build an emergency fund first, capture any employer 401(k) match, then direct extra funds toward high-interest debt before low-rate loans.