Loan payoff calculator
Enter your balance, rate and payment, see what paying extra saves.
How much does paying extra save?
On a $150,000 balance at 7% with a $997.96 monthly payment, adding $200 a month pays the loan off in 226 months instead of 360 and saves $89,271 of interest.
Does a small extra payment help?
Yes: $50 more a month on a $10,000, 8%, 5-year loan ends it 13 months early and saves $518 of interest.
Why does the payment need to be bigger than the interest?
If it only covers the monthly interest, the balance never goes down. The calculator tells you when that happens.
Should I pay extra or invest?
That depends on your rate, your other debts and your savings — this calculator shows the interest saved, not advice on what to do.
Are there prepayment penalties?
Most mortgages and car loans allow extra principal payments, but some loans charge a fee. Check your loan terms, and ask your lender to apply extra money to principal.
Can a mortgage lender charge a prepayment penalty?
Only in narrow cases. Under Regulation Z (12 CFR 1026.43(g)) a penalty is allowed only on a loan whose rate cannot rise, that is a Qualified Mortgage and that is not a higher-priced mortgage. It cannot apply after three years, and it is capped at 2% of the amount prepaid in the first two years and 1% in the third. The lender must also offer you a loan without a penalty.
What is a payoff amount, and how do I get it?
It is the exact sum needed to close the loan on a given day, and it differs from your statement balance because interest keeps accruing between payments. For a mortgage, the servicer must send an accurate payoff statement within seven business days of a written request (12 CFR 1026.36(c)(3)). For other loans, ask the lender for a payoff quote with a good-through date.
How the payoff is calculated
Each month the interest is the balance × the annual rate ÷ 12, and whatever is left of the payment reduces the balance. The loop repeats until the balance reaches zero, first with your payment alone and then with the extra amount added to it every month. The difference in months and in total interest is the saving. The payment must be larger than the first month’s interest, or the balance never falls, and it should be the principal-and-interest payment only: escrow for taxes and insurance does not reduce the loan.
Worked example: $150,000 at 7%
The first month’s interest is $150,000 × 7% ÷ 12 = $875.00, so $122.96 of the $997.96 payment reduces the loan and the rest is interest. Paid as scheduled, the loan runs 360 months and costs $209,258 in interest. Adding $200 a month brings the end to 226 months, 134 months sooner, and interest drops to $119,987, which is $89,271 less.
Common mistakes
Entering a payment that includes escrow overstates how fast the loan falls, because only principal and interest count. Using the statement balance as the payoff figure leaves out interest accrued since the last payment, so get a payoff quote before sending the final check. Sending extra money without checking the loan terms is the third mistake: some loans carry a prepayment fee, and for mortgages Regulation Z limits when one may apply. Finally, an extra payment helps most when it is made early, because interest is charged on the balance each month; this page assumes the same extra amount every month starting now.
Sources: Regulation Z (Truth in Lending), 12 CFR 1026.43(g), on prepayment penalties for mortgages, and 12 CFR 1026.36(c), on crediting payments and payoff statements. The monthly interest and payoff arithmetic is the standard fixed-rate amortization used in the loan calculator. See also the mortgage calculator (extra payments by year), the refinance calculator and the debt payoff calculator for several loans.
Estimates for planning only — not financial advice. Your lender's figures decide. How we check our calculators.