Loan Payoff Calculator

Why Use a Loan Payoff Calculator?

If you have a mortgage, personal loan, or auto loan, making extra payments is one of the most effective ways to save money. By paying more than the minimum required monthly amount, you directly reduce the loan principal. This action leads to a shorter repayment period and substantially lowers the total interest you pay over the life of the loan.

How to Calculate Your Loan Payoff Savings

Our calculator allows you to model different prepayment strategies:

• Extra Monthly Payments: Adding a fixed amount (e.g. $100) to your check every month. This consistent strategy compounds interest savings quickly.
• Extra Annual Payments: Making a larger lump-sum payment once a year, such as when you receive a tax refund or work bonus.
• One-Time Extra Payment: Depositing a single sum at a specific point in your loan timeline to immediately reduce the outstanding balance.

Understanding the Math Behind Loan Amortization

Loans are amortized, meaning each monthly payment is split between paying off interest and reducing the principal balance. The monthly interest is calculated as:

$$\text{Monthly Interest} = \text{Remaining Balance} \times \frac{\text{Annual Interest Rate}}{12}$$

When you make an extra payment, 100% of that extra amount goes directly to the principal balance. This reduces the balance for the next month, which in turn reduces the interest charged in all subsequent months.

Related Financial Calculators

If you are looking for specific loan payoffs, you can use our Car Loan Payoff Calculator or the Student Loan Payoff Calculator. To check how your money grows via compounding interest, try the Compound Interest Calculator.