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Extra Payment Loan Calculator

Enter your loan and an extra monthly payment to see the interest and time you save.

How it is calculated

The tool first finds the normal level payment: pay = P × i / (1 − (1 + i)−n), where P is the loan amount, i is the annual rate divided by 12 (as a monthly decimal) and n is the number of months (years × 12). With a 0% rate it is simply P / n. Baseline interest is pay × n − P. It then simulates the loan month by month with pay + extra paid each month, charging interest on the remaining balance, until the balance reaches zero; the final payment is trimmed to what is owed. Interest saved is the baseline interest minus the interest in the simulation. The extra amount is a fixed monthly add-on and negative extras are treated as zero. Fees and compounding conventions of a specific lender are not modeled.

Worked example

A 200,000 loan at 6% for 30 years has 360 months and a monthly payment of about 1,199.10. Baseline interest is 1,199.10 × 360 − 200,000 = 231,676.38. Adding 200 a month means paying about 1,399.10, and the simulation clears the loan in 252 months instead of 360, a cut of 108 months. Interest in the faster schedule is 151,875.87, so interest saved is $79,800.51.

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Common mistakes

  • Entering the monthly rate (0.5) instead of the annual rate (6).
  • Entering the term in months in the years field; 360 would be read as 360 years.
  • Using the extra amount as a one-time payment. This tool assumes the same extra every month, not a single lump sum.
  • Forgetting that the lender must apply the extra to principal. If it is held as an early payment on the next instalment, the real saving is smaller.
  • Entering the whole monthly payment as the extra amount; enter only the amount above your required payment.

Sources

About this calculator

Every fixed loan payment splits between interest (balance × periodic rate) and principal, and on an amortizing loan that split shifts toward principal each month as the balance shrinks. Adding a fixed extra amount on top of the required payment goes entirely toward principal, which shrinks the balance faster than the original schedule assumed — and because next month's interest is charged on that smaller balance, the savings compound over the life of the loan.

This calculator re-runs the amortization schedule with your extra payment added each month and compares it against the original schedule to show the total interest saved and the number of months shaved off the term. Mortgage and auto-loan holders, and financial advisors use it to decide whether directing spare cash toward extra principal payments beats other uses of that money, like investing it.

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Comments (1)

  • Editorial team

    Think of the saved interest as a risk-free return at your loan rate, which is the fair yardstick against putting the same money elsewhere. The tool assumes the extra amount starts in month one and repeats every month; starting years later, or paying irregularly, saves noticeably less. Before relying on it, confirm your lender applies extra money to principal and charges no prepayment fee. What extra amount are you weighing, and what would you otherwise do with that cash?

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