Loan Payoff Calculator
Loan Payoff Strategies
Make Extra Payments
Even small extra payments can save thousands in interest and years off your loan.
Bi-Weekly Payments
Pay half your monthly payment every 2 weeks. You'll make 13 full payments per year instead of 12.
Round Up Payments
Round your payment up to the nearest $50 or $100 for easy extra principal payments.
Extra Payment Impact
Can save years off your loan
Significant interest savings
Tax refunds, bonuses can help
Related Calculators
Understanding Loan Payoff
How Loan Payoff Works
Every loan payment you make is split between interest and principal. Early in the loan, most of your payment goes to interest. As you pay down the balance, more goes to principal. This is called amortization.
The Power of Extra Payments
Extra payments go directly to principal, reducing the balance that accrues interest. Even small extra payments can save thousands in interest over the life of the loan.
Minimum Payment Requirement
Your payment must exceed the monthly interest charge for your balance to decrease. The minimum payment that makes progress is:
Payoff Strategies
Debt Avalanche
Pay minimums on all debts, put extra toward highest interest rate. Mathematically optimal for saving money.
Debt Snowball
Pay off smallest balances first for psychological wins. Great for motivation but may cost more in interest.
Bi-Weekly Payments
Pay half your monthly payment every two weeks. Results in 13 full payments per year instead of 12.
Round Up Payments
Round your payment to the nearest $50 or $100. Easy way to pay extra without much budget impact.
Sample Payoff Comparison
| Scenario | Monthly | Payoff Time | Total Interest |
|---|---|---|---|
| $20K @ 7%, Min Payment | $400 | 5 years | $3,761 |
| + $100 extra/month | $500 | 3.6 years | $2,648 |
| + $200 extra/month | $600 | 3 years | $2,129 |
| Savings with +$200 | 2 years | $1,632 |
Before Making Extra Payments
Consider These First
- Build an emergency fund (3-6 months expenses)
- Get full employer 401(k) match (free money)
- Pay off higher-interest debt first (credit cards)
- Check for prepayment penalties on your loan
- Ensure extra payment applies to principal, not future payments
Prepayment Penalties
Some loans have prepayment penalties that charge you for paying off early. Check your loan agreement for:
Hard Prepayment Penalty
Charged if you refinance OR pay off the loan early. Can be several percent of the loan balance.
Soft Prepayment Penalty
Only charged if you refinance, not for making extra payments. More common and less restrictive.
Good News
Most auto loans and personal loans today don't have prepayment penalties. Mortgages issued after 2014 (under Qualified Mortgage rules) also typically don't have them. Always verify with your lender before making large extra payments.
Frequently Asked Questions
How much can I save by making extra payments?
Extra payments go directly to principal, reducing the balance that accrues interest. On a $20,000 loan at 7% for 5 years, adding just $100/month saves about $1,100 in interest and pays off the loan 1.4 years early. The higher your interest rate, the more you save with extra payments.
Should I make extra loan payments or save money?
First build an emergency fund (3-6 months expenses) and pay off higher-interest debt like credit cards. Then compare your loan's interest rate to potential investment returns. If your loan is 7% and you expect 5% from savings, paying extra on the loan is better. Also consider getting any employer 401(k) match first.
What is the best way to pay off multiple loans?
Two popular strategies: The avalanche method pays highest-interest loans first (saves most money). The snowball method pays smallest balances first (provides quick wins for motivation). Both work if you stick with them. Mathematically, avalanche saves more, but snowball may help you stay committed.
Do extra payments go to principal or interest?
Specify 'principal only' when making extra payments. Some lenders apply extra payments to future payments (including interest) instead of reducing principal. Contact your lender to ensure extra payments reduce your balance directly. Some require written instructions or have online options to designate principal payments.