See how adding an extra amount to your monthly loan payment shortens your payoff time and reduces total interest.
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This calculator simulates your loan month by month, comparing your current payment schedule against the same schedule with an extra amount added each month. Because interest is calculated on the remaining balance, paying extra directly reduces principal faster, which lowers the interest charged in every future month for the rest of the loan.
Adding even a modest extra amount to a monthly mortgage or loan payment can shave years off the payoff time and save a substantial amount in total interest, often more than the extra payments themselves might suggest, because the savings compound over the remaining life of the loan.
For example, on a $200,000 balance at 6.5% with a $1,500 monthly payment, adding just $200 extra per month cuts the payoff time from 238 months to 188 months, 50 months (over 4 years) sooner, and saves $36,561.08 in total interest, more than 180 times the size of a single extra payment.
Assuming extra payments need to be large to matter, as the worked example shows, a modest $200 extra on a $1,500 payment saved over $36,000 in interest, small amounts compound significantly over a long loan.
Not checking for prepayment penalties first, some loans charge a fee for extra or early payments that could offset part of the interest savings.
Forgetting to confirm with your lender that extra payments are applied to principal, not held as an early future payment, some servicers require you to specify this explicitly.
Extra payments go directly toward reducing your principal balance, which reduces the interest charged in every subsequent month for the remaining life of the loan, so the savings compound over time.
No, some loans charge a fee for paying off early or making extra payments. Check your loan agreement or with your lender before making extra payments.
If your payment doesn't cover the monthly interest charge, the loan balance would never decrease. The calculator will show an error in this case rather than an incorrect result.
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