How this calculator works
This calculator compares a loan's standard fixed-payment schedule against what happens when you add a fixed extra amount to every monthly payment. The entire extra amount is applied directly to principal, which reduces the balance faster than the standard schedule and cuts short every future month of interest that would otherwise have accrued on that principal.
The new payoff time is found by simulating the loan month by month at the higher payment amount until the balance reaches zero, rather than using a shortcut formula — the same discrete approach lenders use to apply real payments to a real balance.
The formula
Standard payment: M = P × i ÷ (1 − (1 + i)^−n)With extra payments, simulated month by month: balance = balance × (1 + i) − (M + extra), until the balance reaches zero.P is the loan amount, i the monthly interest rate (annual rate ÷ 12), and n the number of scheduled payments (years × 12). Setting extra to zero reproduces the standard schedule exactly, since the payment already amortizes the loan to zero in n months.
Worked example: $200,000 at 6% for 30 years, $200 extra a month
- Standard payment on $200,000 at 6% over 360 months is $1,199.10, for total interest of about $231,676 over the full term.
- Paying $1,399.10 a month instead (the standard payment plus $200) is simulated month by month until the balance hits zero.
- The balance reaches zero after 252 months rather than 360 — 108 months, or exactly 9 years, earlier.
- Total interest under the accelerated schedule is about $151,876, a savings of roughly $79,800 compared with the standard 30-year schedule.
Frequently asked questions
Does the extra payment need to be sent separately from the regular payment?
Not usually — most lenders let you send one combined payment as long as you confirm with your servicer that the extra amount is applied to principal rather than held as a future payment or applied to interest first. Check your account settings or ask the servicer directly to be sure.
Why does a relatively small extra payment save so much interest?
Because interest is charged on the outstanding balance every month, a dollar of extra principal paid off early avoids interest on that dollar for every remaining month of the original term. Over a long loan like a 30-year mortgage, that compounding effect adds up to far more than the extra payments themselves.
Is paying extra always better than investing the difference?
It depends on the loan's interest rate versus what you could reasonably expect to earn elsewhere, after taxes and risk. Paying extra on a loan is a guaranteed, risk-free return equal to the interest rate; investing may earn more over time but is not guaranteed. This calculator only compares the loan side of that decision.
What if I can only pay extra some months, not every month?
This calculator assumes a consistent extra amount every month. Irregular extra payments still help, but the exact time and interest saved will differ from a steady monthly extra — occasional lump sums generally save less in total than the same dollars spread evenly, because they reduce the balance later on average.
Does this work the same way for a mortgage, car loan, or personal loan?
Yes. Any fixed-rate, fully amortizing loan follows the same math, so the same extra-payment logic applies whether the loan is a mortgage, an auto loan, or an unsecured personal loan.