Do extra loan payments really save interest?

Yes — every extra dollar reduces the principal immediately, so all future interest is computed on a smaller balance. On an $18,000 loan at 9% APR, $100 extra a month typically saves over a thousand dollars of interest and cuts the term by about a year.

Is there a penalty for paying off a loan early?

US personal loans, auto loans and federal student loans almost never carry prepayment penalties, but a small minority of contracts do — check the agreement or ask the lender before sending a large lump sum.

Should I pay extra monthly or make one big payment?

Money applied earlier saves more, so a lump sum today beats the same amount spread over years. The calculator prices your monthly extra and your one-time payment separately so you can see each move's worth.

Early Loan Repayment Calculator — Interest Saved, Months Cut

The interest picture

Before and after, line by line

Your balance, month by month

Solid: with your extras. Dashed: the regular schedule. The gap is money that stays yours. Hover any month.

What each move is worth

How we calculate

What is included

Interest accrues monthly at APR ÷ 12 on the remaining balance. Your required payment lands each month; the extra amount and the one-time payment go straight to principal. The regular schedule (dashed) is the same loan with no extras — the difference between the two paths is your saving.

What is estimated or left out

A planning estimate. Some loans compute interest daily rather than monthly — the difference is small. Prepayment penalties are rare on US personal, auto and federal student loans, but check your agreement. If your payment does not even cover the first month’s interest, the balance grows — the verdict will warn you.

The formula, in plain words

each month:  interest = balance × APR ÷ 12
             balance  = balance + interest − payment − extra
one-time payment lands in month 1
saving = interest on the regular schedule − interest on your plan

Common questions

Where should extra money go first — this loan or elsewhere?: Rough order that serves most people: minimum payments everywhere → employer 401(k) match → highest-APR debt first. If this loan’s rate is your highest, it is the right target; if a credit card charges more, feed the card first — our Debt Payoff Planner orders several debts at once.
Will extra payments lower my monthly payment?: No — the required payment stays the same; the loan just ends sooner. Make sure the servicer applies extras to principal, not as an early next payment.
Is it worth paying off a low-rate loan early?: Below roughly 5% it is often better to keep the loan and put extra money in savings earning about the same — especially before your emergency fund is full. Above 8–9%, early payoff is a strong guaranteed return.

Early Loan Repayment