1. What is the Loan Payoff Calculator?

The Loan Payoff Calculator with Extra Payments determines how much faster you can pay off a loan by making additional payments each month. It calculates your new payoff time and the total interest you'll save.

2. How Does the Calculator Work?

The calculator uses an iterative approach to solve:

Where:

• \( P \) — Principal loan amount (USD)
• \( r \) — Monthly interest rate (decimal)
• \( n \) — Original loan term (months)
• \( \text{extra} \) — Additional payment amount (USD)

Explanation: The calculator first determines your standard monthly payment, then simulates each month's payment with the extra amount applied to principal until the balance reaches zero.

3. Importance of Extra Payments

Details: Even small extra payments can significantly reduce your loan term and total interest paid, often saving thousands of dollars over the life of the loan.

4. Using the Calculator

Tips: Enter your loan principal, monthly interest rate (annual rate ÷ 12), original term in months, and your planned extra payment amount. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How much should I pay extra each month?
A: Even $25-50 extra per month can make a significant difference. The more you can pay, the faster you'll be debt-free.

Q2: Does the extra payment go toward principal or interest?
A: After paying the scheduled interest, the entire extra amount goes toward reducing your principal balance.

Q3: Should I pay extra or invest the money?
A: Compare your loan interest rate with expected investment returns. Paying off high-interest debt usually provides better guaranteed returns.

Q4: Can I make lump sum payments instead?
A: Yes, lump sum payments work similarly to monthly extra payments in reducing your principal and total interest.

Q5: Will my monthly payment decrease with extra payments?
A: No, your required payment stays the same, but more goes toward principal as your balance decreases.