How to use the loan payoff calculator
- Enter your Current loan balance from your latest statement, and the Annual interest rate (use 0 for an interest-free loan).
- Type the Monthly payment you make now. It must be larger than one month of interest, or the balance never falls.
- Add an Extra monthly payment to see what it saves, or clear the box to see only your regular plan.
- Set Next payment to your next due month and year so dates are real.
- Read the payoff date, total interest and total paid, then open Payment schedule for every payment.
How the payoff is calculated
Each month the lender charges interest on what you still owe, and the rest of your payment reduces the balance. The CFPB explains that early payments go mostly to interest because the balance is still high. The calculator repeats this until the balance reaches zero:
interest = balance × (annual rate ÷ 12)
new balance = balance − (payment + extra − interest)
The last payment is smaller because it only clears what is left. Extra money goes entirely to principal.
Worked example
The calculator opens with a $25,000 balance, 6.5% interest, a $500 payment and $100 extra. The first month's interest is $25,000 × 0.065 ÷ 12 = $135.42, so $364.58 of that first $500 reduces the balance. Without the extra, the loan takes 59 payments (4 years 11 months), costs $4,234.89 in interest and $29,234.89 in total, and the last payment is only $234.89. Paying $600 a month ends it in 48 payments (4 years), with $3,410.55 of interest. That is 11 months sooner and $824.34 less interest.
Limits and edge cases
- The model has a fixed rate and a fixed payment. Variable-rate loans and credit cards, whose minimum payment shrinks as the balance falls, are better handled by the credit card payoff calculator.
- Interest is figured once a month. Many auto loans accrue interest daily, so paying early or late changes your interest slightly, and your lender's totals can differ by a few dollars.
- Fees are not included. Check your contract for a prepayment penalty first: the CFPB describes it as a fee some lenders charge for paying early.
- A payment at or below the first month's interest, or a loan that would last over 100 years, shows a message instead of a date.
- Starting from a loan term instead of a balance? Use the amortization schedule for the full table or the auto loan calculator for the payment.
Loan payoff FAQ
How do extra payments reduce the interest on a loan?
Interest is charged on the balance you still owe, so every extra dollar lowers the balance right away and each later month's interest is smaller. In the example above, $100 extra a month saves $824.34 in interest and 11 months.
Should I pay off my loan early or invest the money?
Compare your loan rate with the return you could reasonably expect after taxes. Paying down a loan earns a certain return equal to its rate (6.5% in the example), while investment returns vary. Keep an emergency fund first.
Does my loan have a prepayment penalty?
Read your loan contract. Federal student loans have none, and servicers say you can pay extra at any time. Some auto and personal loans charge a fee for paying early. The CFPB says mortgage penalties do not normally apply to small extra principal payments.
What if my payment does not cover the monthly interest?
Then the balance stops shrinking, and on some loans it grows. The calculator shows the first month's interest, the least you must pay. Raise your payment above it or ask your lender about refinancing.
Is a payoff amount the same as my loan balance?
No. The CFPB explains that a payoff amount adds the interest you owe through the day you pay, so it is a little higher than your statement balance. Ask your lender for a payoff quote before you send a final payment.
Sources: CFPB, amortization; CFPB, prepayment penalty; CFPB, payoff amount; Federal Student Aid servicer, extra payments. Estimates only, not a payoff quote. Related reading: avalanche vs snowball debt payoff.