Loan Payoff Calculator

Extra payments go directly toward your loan principal, reducing the balance faster. This means less interest accrues on future payments, creating a snowball effect. Even small extra payments — like $50 or $100/month — can save thousands in interest and shorten your loan by years.

Paying off a loan early saves you money on interest, but consider: your interest rate (high rates benefit more from early payoff), any prepayment penalties, whether you could earn more investing that money, and your overall financial picture. Generally, paying off high-interest debt first is a good strategy.

Most loans use simple interest calculated on the outstanding balance. Each month, interest = (annual rate / 12) x remaining balance. As you pay down principal, less interest accrues. This is why early extra payments have the biggest impact — they reduce the principal that interest is calculated on.

The loan term is how long you have to repay the loan (e.g., 5 years, 30 years). Amortization is the process of spreading payments over that term so each payment covers both principal and interest. An amortization schedule shows exactly how each payment is split.

Biweekly payments (every 2 weeks) result in 26 half-payments per year — equivalent to 13 monthly payments instead of 12. This extra payment goes to principal, which can shave years off a 30-year mortgage and save tens of thousands in interest.