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Loan Interest Savings Calculator

Enter your loan balance, rate, base payment, and extra payment to see your interest savings.

How it is calculated

You enter the current balance, the yearly interest rate (APR, in %), your regular monthly payment and a fixed extra amount to add each month. The tool runs the loan month by month twice, once paying the base payment and once paying base + extra. Each month the interest is balance × APR ÷ 1200, the payment is applied, and the rest reduces the balance. The last payment is cut down so it never overpays. It then reports interest saved = interest (base) − interest (base + extra), the number of months shorter, and the total interest of the plan without extra payments. The base payment must exceed the first month's interest, otherwise the balance never falls and the tool returns nothing. Fees, insurance and prepayment penalties are not modelled.

Worked example

A loan balance of 20,000 at 7% APR with a regular payment of 400 a month. The monthly rate is 7 ÷ 1200 = 0.5833%. Paying 400 clears the loan in 60 months and costs $3,715.34 in total interest. Adding 100 a month (500 in all) clears it in 46 months with $2,841.23 of interest. The difference is $874.11 of interest saved and 14 months earlier. The tool shows saved $874.11, 14 months and base interest $3,715.34.

Try this example →

Common mistakes

  • Entering the APR as a decimal such as 0.07. The field is in percent, so 0.07 is read as 0.07% per year and the savings come out near zero.
  • Putting the original loan amount instead of the balance you owe now. The tool starts the clock from the balance entered, so use the current outstanding principal.
  • Entering the total new payment in the extra field. Extra means only the additional amount; if you will pay 500 in place of 400, enter 400 as base and 100 as extra.
  • Using a base payment that includes escrow, taxes or insurance. Only the part that goes to the loan counts; otherwise the base run looks shorter than the true loan.
  • Forgetting the extra must be applied to principal. If your lender holds the extra as an early payment for next month's instalment, the real savings are smaller than shown.

Sources

About this calculator

Every loan payment splits between principal (paying down what you owe) and interest (the cost of borrowing), and interest is recalculated each period on whatever balance remains. Adding a fixed extra amount on top of your required monthly payment goes straight to principal, which shrinks the balance interest is charged on for every remaining month of the loan.

Because interest compounds over the life of a mortgage, auto loan, or personal loan, even a modest extra payment can shave months or years off the payoff date and save a surprising amount in total interest — this is the math behind popular "debt snowball" and "extra principal payment" strategies used by financial planners and DIY debt payoff plans.

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Comments (1)

  • Editorial team

    Each extra dollar you add shortens the loan and saves interest at the loan's own rate, so it is worth setting the saving against what that cash could do elsewhere, such as an emergency fund or a higher-rate debt. The tool assumes the extra goes entirely to principal every month from the start and ignores fees. Check your lender's prepayment terms. What balance and rate are you weighing an extra payment against?

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