How much time and interest can an extra monthly loan payment save?
An extra payment reduces principal faster, which reduces the balance used for later interest calculations. The benefit therefore accumulates month by month rather than being a simple multiple of the extra amount.
Recalculating the balance with extra principal
The calculator first finds the scheduled payment for the original fixed-rate loan. It then simulates each month, adds interest to the remaining balance and applies the base payment plus the entered extra amount.
The simulation stops when the balance reaches zero. Comparing it with the original schedule gives months and interest saved; prepayment penalties and changing rates are excluded.
One recurring overpayment
The default scenario first calculates the original amortising payment, then repeats the balance calculation with the entered extra amount until the loan reaches zero.
Term reduction versus interest reduction
Months saved measures the term reduction; interest saved compares total interest under the two schedules. The same extra payment has a different effect depending on balance, rate and remaining term.
An original schedule and an accelerated schedule
Base payment = Principal × i ÷ [1 − (1 + i)⁻ⁿ]Each month with the extra payment: Interest = Balance × i Balance = Balance − (Payment + Extra − Interest)Repeat until the balance reaches zero.Negative amortisation and lender rules
If a payment does not cover accrued interest, the balance cannot amortise. The calculator flags that condition instead of treating a zero-month result as an immediate payoff.
- The loan has a fixed rate and monthly amortisation schedule.
- The extra amount is paid every month and applied directly to principal.
- Prepayment penalties, changing rates and lender allocation rules are excluded.
Calculations related to early loan payoff
The following tools examine neighbouring parts of the same calculation without changing the inputs or assumptions used above.
Quick answers
Frequently asked questions
Does an extra loan payment reduce principal immediately?
In the monthly simulation, interest is calculated first and the remaining payment amount reduces the balance.
Can extra payments shorten the loan term?
Yes. A larger amount applied each month reduces the simulated balance faster and can lower both term and interest.
Are early-repayment penalties included?
No. The result assumes the extra amount can be paid without fees or restrictions.
Educational content only. This guide is not financial advice.