Small extras add up
Paying a little more each month reduces the balance faster, so less interest accrues. This calculator shows the months you would save and the interest you would avoid.
The method
It first finds your regular payment. Then it calculates how many months the loan lasts when the extra amount is added: n = -ln(1 - balance x r / payment) / ln(1 + r), where r is the monthly rate.
Example
On a $20,000 loan at 8% over 60 months the payment is about $406 and interest is roughly $4,330. Adding $100 each month clears the loan in about 46 months and cuts interest to near $3,300, saving about $1,040 and 14 months.
Before you pay extra
Check for prepayment penalties and make sure extra payments are applied to principal. Keep an emergency fund and clear higher-rate debt first.
Good to know
The tool assumes a fixed rate and that each extra payment is made every month.
Frequently asked questions
Do all lenders allow early payoff?
Most do, but some charge a fee. Read your agreement.
Is it better to pay extra or invest?
If your loan rate is higher than the return you can reliably earn, extra payments are attractive.
Will paying early hurt my credit?
Closing an account can change your credit mix slightly, but the interest saved is usually worth it.