1. What is the Loan Payoff Calculator?

This calculator determines how much faster you can pay off a loan by making additional monthly payments. It shows the new payoff time, months saved, and total interest savings.

2. How Does the Calculator Work?

The calculator uses an iterative approach to solve:

Where:

• \( n \) — Number of months until payoff
• \( P \) — Principal loan amount (USD)
• \( r \) — Monthly interest rate (decimal)
• extra payments — Additional monthly payments (USD)
• PMT — Regular monthly payment (USD)

Explanation: The calculator simulates each month's payment, applying extra amounts to principal until the balance reaches zero.

3. Importance of Early Payoff Calculation

Details: Understanding the impact of extra payments helps borrowers save thousands in interest and become debt-free faster.

4. Using the Calculator

Tips: Enter the original loan amount, interest rate, term, and your planned extra payment. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How much extra should I pay to cut my loan in half?
A: The relationship isn't linear, but typically paying double your regular payment will pay off the loan in about 1/3 the time.

Q2: Is it better to pay extra monthly or make lump sum payments?
A: Mathematically equivalent if applied at the same time, but monthly extra payments are easier to budget for most people.

Q3: Do extra payments automatically go toward principal?
A: You must specify they should be applied to principal - check with your lender about their policies.

Q4: Are there loans where extra payments don't help?
A: Precomputed interest loans (like some auto loans) may not benefit from early payoff - check your loan terms.

Q5: Should I pay off loans early or invest?
A: Depends on interest rates - generally pay off high-interest debt (>6-7%) before investing.