Extra loan payments: interest saved and payoff date
See how an extra payment applied to principal can shorten a fixed-rate loan, and check prepayment rules before comparing scenarios.
Read the first month of an amortization schedule
On a 12,000 loan at a fixed 6% annual rate over 36 monthly payments, the monthly principal-and-interest payment is about 365.06. The first month’s interest is 12,000 × 0.06 ÷ 12 = 60; roughly 305.06 of that first payment reduces principal. Later interest falls as the balance falls. Compare the schedule in the loan calculator.
Apply the extra amount to principal
If you add 50 to a regular payment and the lender applies it to principal immediately, the next month’s interest uses a smaller balance. The new payoff date and savings depend on the timing, frequency and contract terms; avoid assuming the lender automatically shortens the loan. Ask how extra funds are allocated and whether a prepayment fee applies.
Compare the entire cost
Use the same rate and payment dates across scenarios, then compare total interest and the date the balance reaches zero. Do not subtract the extra payment from interest savings: it is a repayment of money borrowed. The debt payoff calculator can help plan several balances, while the loan cost guide explains principal, interest and fees.