How to use
- Enter the current principal, not the original amount, if you have already been paying.
- Enter the APR and the remaining term you are comparing against, in years.
- Enter the extra dollars you would add every month on top of the scheduled payment. Use 0 to see the scheduled loan alone.
- Press Calculate. Read the interest saved and the shorter payoff. Reset clears the numbers.
How it's calculated
Each month: interest = balance × APR ÷ 12
Principal paid = payment − interest
The scheduled payment is the standard formula P × r × (1 + r)^n ÷ ((1 + r)^n − 1), with r = APR ÷ 12. The extra-payment path uses that same payment plus the extra dollars, then walks the balance month by month until it hits zero. Interest is charged on the remaining balance, so a smaller balance next month is why the savings are larger than “extra dollars times months.”
The main payoff calculator answers a single payment. This page is only the comparison. A full table of the faster loan is on the amortization schedule. Credit cards that recompute a minimum from a percent of the balance are on the credit card payoff calculator.
Worked example
Ten thousand dollars at 7 percent for 5 years has a scheduled payment of $198.01. Paying an extra $50, so $248.01 a month, finishes sooner and costs less interest than the scheduled loan. The page reports both interest totals and the difference, using month-by-month balances rather than a flat estimate.
Assumptions and sources
The extra amount is applied every month, starting with the first month, and the rate does not change. There is no separate annual lump sum. Lenders can apply extra payments differently, and some loans have a prepayment penalty this page cannot see. The math is ordinary monthly amortization, the same model used for fixed-rate installment loans.
FAQ
Is the extra amount added to principal?
The model applies the whole payment to that month’s interest first and the rest to principal, which is how a standard installment loan works. Your statement controls the real application.
What if I pay extra only some months?
This form assumes the same extra amount every month. A one-time extra payment needs a different schedule; the amortization page lets you raise the payment used in the table.
Will my required payment drop?
Not in this model. The required payment stays the scheduled amount, and the extra is voluntary. Some lenders recast a loan; that is a contract change, not this formula.
Does a shorter original term do the same thing?
A shorter term raises the required payment for the whole loan. An extra payment leaves the required payment alone and shortens the loan only while you keep paying the extra.