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Loan Prepayment Calculator
Use this free loan prepayment calculator to see what paying extra on any loan is really worth. Enter your remaining balance, interest rate, months left, and the extra monthly payment or lump sum you plan to make, and the tool shows the interest saved, the months saved, and your new payoff date — with a chart comparing the balance with and without prepayment.
The lump sum is applied at once, at the start. Check with your lender first: some loans charge a prepayment penalty, and some apply extra payments differently.
Loan balance over time
The chart compares the remaining balance month by month: the grey line is the loan as scheduled, and the blue line is the loan with your extra payments. The gap between them is the time and interest you save.
With the extra payments the loan finishes sooner — see the result below for exactly how much sooner.
How it works
Prepaying a loan means paying more than the scheduled monthly payment, so the balance falls faster and less interest builds up. Every extra dollar you pay goes straight to the principal — the amount you actually owe — instead of being eaten by interest, and a smaller balance means less interest charged the next month, which means more of the following payment goes to principal too. The effect compounds quietly: a modest extra payment each month can cut years off a long loan and save tens of thousands in interest. This calculator shows exactly how much, for any kind of loan.
Each input has a clear job. The remaining loan balance is what you still owe today, not the amount you originally borrowed. The interest rate is the annual rate on the loan. The remaining term is how many monthly payments are left on the current schedule. The extra monthly payment is the amount you will add to every payment from now on, and the lump sum is a one-off payment applied at once — a bonus, a tax refund, or savings you want to put against the loan. The start date is used only to turn the months saved into a calendar payoff date.
Each month: Interest = Balance × r · Principal paid = Payment − Interest · New balance = Balance − Principal paid
The calculator first works out the scheduled monthly payment from the balance, rate, and remaining term, using the standard loan formula with r as the monthly rate and n as the months left. Then it runs the loan month by month, twice: once with only the scheduled payment, and once with the scheduled payment plus your extra payment, after subtracting the lump sum from the starting balance. Each month it charges one month of interest on the balance, applies the payment, and reduces the balance. The run stops when the balance reaches zero. Comparing the two runs gives the months saved, the interest saved, and the new payoff date.
Reading the answer is straightforward. Interest saved is the difference between the total interest on the original schedule and the total interest with your extra payments — that is money you simply never pay. Months saved is how much sooner the loan ends, and the new payoff date is the calendar date the loan would finish. The chart shows the balance falling faster with prepayment; the wider the gap between the two lines, the more the extra payments are doing. Early in a loan the gap grows slowly, because interest eats most of each payment, and it widens fast in the later years as the balance shrinks.
Two practical checks come before you prepay. First, ask your lender whether there is a prepayment penalty — some loans charge a fee for paying early, and a penalty can wipe out the saving on a small prepayment. Second, ask how extra payments are applied: most lenders apply them to the principal, which is what you want, but a few hold them as advance payments of future instalments, which saves nothing. When those checks pass, prepaying is one of the most reliable ways to save money in personal finance.
Worked example
Suppose you owe $200,000 on a loan at 6% a year with 240 months (20 years) left, and you decide to pay an extra $200 a month plus a one-time lump sum of $5,000 now. How much do you save?
Step 1: Work out the scheduled payment. The monthly rate is 6% ÷ 12 = 0.5%, so the scheduled payment is $200,000 × 0.005 × 1.005²⁴⁰ ÷ (1.005²⁴⁰ − 1) = $1,432.86 a month. Over 240 months that is $343,886.91 paid in total, of which $143,886.91 is interest.
Step 2: Apply the lump sum and the extra payment. The lump sum cuts the balance to $195,000 at once, and each month you now pay $1,432.86 + $200 = $1,632.86. Because more of each payment goes to principal, the balance falls faster and less interest is charged each month.
Step 3: Compare the two runs. With the extra payments the loan finishes in 183 months instead of 240, and the total interest falls to $102,627.53. That is 57 months saved and $41,259.38 of interest saved. Enter the same figures in the calculator — balance $200,000, rate 6%, 240 months left, extra $200, lump sum $5,000 — and it returns exactly interest saved $41,259.38, months saved 57, new term 183 months. With a November 2026 start, the payoff date moves from November 2046 to February 2042 — nearly five years of payments you never have to make.
FAQ
How does prepaying a loan save interest?
Each extra payment goes straight to the principal, so the balance falls faster and less interest is charged the next month. That saving compounds month after month: a smaller balance means less interest, which means more of the next payment goes to principal, and so on until the loan ends years early.
Is it better to make a lump-sum payment or pay extra every month?
Both help, and they work best together. A lump sum cuts the balance at once, so every month after it is charged interest on a smaller amount. An extra monthly payment keeps the pressure on the balance all the way through. If you can only do one, a regular extra payment usually saves more over a long loan.
Does my lender charge a fee for prepaying?
Some loans do — it is called a prepayment penalty, and it is usually a percentage of the amount prepaid or a few months of interest. Check your loan agreement or ask your lender before you prepay, because a penalty can cancel out the saving on a small prepayment.
Should I prepay my loan or invest the money instead?
Prepaying a 6% loan earns a guaranteed 6% return, which beats most savings accounts but may be less than long-term investing — with more risk. Pay off higher-rate debt first, keep an emergency fund, and then compare the loan rate with the return you could reasonably expect elsewhere.
Does this calculator work for any type of loan?
Yes. It is a generic loan prepayment tool: it works for personal loans, car loans, home loans, and any other loan repaid in fixed monthly instalments at a fixed rate. You only need the balance, the rate, and the months left — not the type of loan.