Extra Payment Calculator
↻ Updated 2026Add an extra amount to your monthly payment and watch how many months and how much interest it saves over the life of a loan.
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How to read what an extra payment buys you
$150 a month on top of a $373.65 payment saves $1,524.45 of interest and finishes the loan 20 months early. The extra money is unusually efficient because it skips the interest queue entirely — your scheduled payment already covered this month's interest, so every extra dollar lands on principal, and every dollar of principal retired stops accruing 9% for the rest of the term.
Why an extra payment is worth more than it looks
The scheduled payment is computed first, from the original balance, rate and term — $373.65 for $18,000 at 9% over 60 months. That figure is fixed by the loan contract and doesn't change when you pay extra. The simulation then runs the schedule twice: once with the scheduled payment alone, once with the extra added on top every month, and reports the difference in months and interest.
The leverage comes from the ordering. Interest is charged on the balance first, and your scheduled payment is calibrated to cover it. So the extra $150 arrives after the month's interest is already paid — there's nothing left for it to be diluted by, and 100% of it reduces principal. That retired principal then never accrues interest again for the remaining life of the loan, which is why a dollar paid in month one is worth much more than a dollar paid in month fifty.
scheduled payment = balance × r ÷ (1 − (1 + r)^−term) where r = APR ÷ 12 each month, with the extra: interest = balance × r principal = (scheduled payment + extra) − interest balance = balance − principal stop when balance reaches 0 — early interest saved = interest without extra − interest with extra months saved = payoff months without − payoff months with
- balance
- What you owe on the loan right now — the starting point for both scenarios — they only differ in the payment
- term
- The original term in months, used to derive the scheduled payment — it sets the payment and then stops mattering; the extra scenario simply finishes sooner
- scheduled payment
- The contractual monthly payment — $373.65 on the defaults — it does not fall when you pay extra, which is the point of the FAQ below
- extra
- What you add on top, every month — applied entirely to principal because the scheduled payment already covered the interest
- r
- The monthly rate, APR ÷ 12 — the rate your retired principal stops earning against — this is the return on the extra payment
There's a clean way to think about the return. Paying an extra dollar of principal on a 9% loan earns exactly 9%, guaranteed and tax-free, for as long as that dollar would otherwise have sat on the balance. It's one of the few genuinely certain returns in personal finance — the only uncertainty is your own ability to keep making the payment.
The diminishing pattern follows from the same logic: the first extra dollars work across the full remaining term, while later ones have less time to save against. That's why interest saved rises with the extra payment but flattens as it goes. For the same idea at 22.9%, the credit card payoff calculator runs it on a card.
Worked examples
Example: $18,000 at 9% over 60 months, plus $150 a month
The calculator's defaults. A five-year loan with a scheduled payment of $373.65, and you decide to send $523.65 instead.
| Scheduled payment$18,000 at 9% over 60 months | $373.65 |
| Month 1 interest$18,000 × 9% ÷ 12 — covered by the scheduled payment | $135.00 |
| Month 1 principal, scheduled$373.65 − $135.00 | $238.65 |
| Month 1 principal, with extrathe full $150 lands on principal | $388.65 |
| Without extra60 months | 5 yr · $4,419.02 |
| With extra40 months | 3 yr 4 mo · $2,894.57 |
| Savedfor $6,000 of extra payments | $1,524.45 · 20 months |
Twenty months early and $1,524.45 cheaper. The trade is worth stating plainly: you paid an extra $6,000 across 40 months and it bought you $1,524.45 of interest you'd otherwise have owed — a 25% return on the money diverted, spread over three and a bit years. That's the return on a 9% loan; on a 22.9% card the same exercise pays far better.
Example: the shape of the returns, from $25 to $300
Same $18,000 loan at 9%. Only the extra-payment slider moves. Watch how the saving grows — and how it grows more slowly than the money you put in.
| +$25/mo56 months — 4 months early | 4 yr 8 mo · saves $359.54 |
| +$150/mo40 months — 20 months early | 3 yr 4 mo · saves $1,524.45 |
| +$300/mo30 months — 30 months early | 2 yr 6 mo · saves $2,255.86 |
| Saving per $1 of extra, at $25$359.54 ÷ 25 | $14.38 |
| Saving per $1 of extra, at $150$1,524.45 ÷ 150 | $10.16 |
| Saving per $1 of extra, at $300$2,255.86 ÷ 300 | $7.52 |
Twelve times the extra payment ($25 → $300) buys only six times the saving. Each additional dollar is less productive than the last, because it has a shorter loan left to save against — you're accelerating toward a floor where the loan simply ends and there's no more interest to avoid. The practical read: the first $25 is the best-value $25 on the slider, and there's no cliff you need to clear before extra payments start working.
Frequently asked questions
Does paying extra on a loan reduce the monthly payment?
No — it shortens the loan instead. The scheduled payment is fixed by the amortization schedule set at origination, and it stays at $373.65 whether you pay extra or not. What changes is how many times you make it: 40 instead of 60.
If you specifically need a lower payment rather than a shorter loan, extra payments are the wrong instrument. The mechanisms that actually lower a payment are recasting — where a lender re-amortizes the remaining balance over the remaining term after a lump sum, which some offer and none owe you — or refinancing into a new loan. Both are separate transactions from simply sending more money.
Is it better to make biweekly payments or one extra monthly payment?
They're close, and the extra monthly payment wins slightly. Both schemes are usually sold as producing 13 monthly payments a year — biweekly gives you 26 half-payments, and 26 halves is 13 wholes. But timing decides it: an extra amount added to each month's payment starts reducing principal in month one, while a biweekly plan effectively accumulates the extra through the year before it does the same work.
The gap is small — a couple of months on a long mortgage — and it can invert if a third-party biweekly service charges a setup or per-transaction fee, which some do. The calculator above models the monthly version, which is the one you can set up yourself for free by adding to what you already send.
Is there a prepayment penalty for paying off a loan early?
Sometimes, though far less often than a decade ago — the CFPB notes federal rules have made them much less common. Where they exist they typically bite only if you clear the whole balance within the first few years, usually because you refinanced or sold, rather than penalising the sort of steady extra payments modelled here. Government-backed mortgages — FHA, VA and USDA — prohibit them outright on single-family loans.
This calculator assumes no penalty at all. If yours has one, it's in your loan agreement, and it changes the arithmetic of a lump-sum payoff much more than it changes the arithmetic of an extra $150 a month.
Should I pay off my loan early or invest the money?
We report the two sides rather than picking one. Paying down a loan returns exactly its rate — 9% here — with certainty, no tax, and no volatility. Investing offers a higher expected return with no guarantee and a real chance of doing worse over any given few years. The comparison is not return against return; it's a certain return against an uncertain one, which is why people with identical numbers reasonably choose differently.
Published rules of thumb exist and disagree with each other, generally clustering around thresholds somewhere in the mid single digits — that lack of consensus is itself informative, and we'd rather show you the inputs than adopt someone's cutoff. Two things do shift the arithmetic concretely: a tax-deductible loan lowers the effective rate you'd be beating, and an employer match on retirement contributions is an immediate return that no loan rate on this slider approaches.
Does paying extra on a car loan help?
The arithmetic is identical to what's on this page — a car loan is a fixed-rate amortizing loan, so extra payments hit principal and shorten the term exactly as modelled. Set the balance, APR and original term to your car loan's figures and the answer is directly usable.
The one car-specific angle the model doesn't see is equity. Cars depreciate faster than a typical loan amortizes in the early months, which is how borrowers end up owing more than the car is worth. Extra payments close that gap sooner, which matters if you might sell or total the car before the loan ends — a benefit that doesn't show up in the interest-saved figure at all.
What the extra-payment comparison assumes
The two schedules are computed exactly. The assumptions around them are where real loans differ.
- Every extra payment is applied to principal, immediately — The model credits the extra to principal the month you send it. Not every servicer does that by default — some hold extra funds and apply them to the next scheduled payment instead, which achieves almost nothing. Whether your lender applies extra to principal automatically, or needs telling, is a question for the lender.
- The extra arrives every single month — All 40 months of it, without a miss. A real extra payment is usually the first thing to go in a tight month, and the model has no way to represent an irregular or occasional lump sum.
- No prepayment penalty, no fees, and a fixed rate — All assumed away. Penalties are uncommon on US personal and auto loans and prohibited on government-backed mortgages, but not universal — one tied to early payoff would reduce or reverse the $1,524.45 saving. The 9% is also constant; a variable rate changes both the scheduled payment and the value of every extra dollar already paid.
- It ignores what else the money could do — Interest saved is the only benefit counted. It says nothing about the emergency fund you didn't build, the employer match you didn't collect, or the higher-rate debt on another page — all of which compete for the same $150.
- ·Standard loan amortization formulas
Rates, brackets and limits here are checked against primary sources. If a number still looks off, email support@realmoneyiq.com and we'll review and fix it.
RealMoneyIQ provides free educational calculators, not financial, tax, investment or legal advice. Results are estimates based on the assumptions you enter and publicly published rates; your actual outcome will differ. Always confirm decisions with a licensed professional who knows your full situation.