Why extra payments crush interest
Loans are front-loaded on interest. Early in the loan, 60–80% of each payment goes to interest. Adding even $50–$100/mo of extra principal in year 1 skips future months entirely and compounds forward.
- • $100/mo extra on a 30-yr mortgage cuts ~5–8 years
- • One extra payment/year (biweekly setup) cuts ~5 years off 30-yr
- • Lump sums early are worth 5–10× the same lump sum late
- • Highest-APR debt first (avalanche) saves the most
Avalanche vs. snowball
Mathematically, always attack the highest APR debt first (avalanche). Psychologically, some people need quick wins (snowball — smallest balance first). Snowball is 5–15% more expensive but has 30%+ better completion rates. Use this calculator per loan to see the real cost gap.
When NOT to prepay
If your loan APR is below what you can safely earn elsewhere after tax — for a 3.5% mortgage vs. a 5% Treasury/HYSA, invest the extra instead. Also don't prepay to the point you can't cover a 3-month emergency fund.
Related guides
Long-form playbooks on the same topic, written by the RevenueLab editorial team.
FAQ
How much can I save by paying my loan off early?
Depends on your APR and remaining term. High-APR loans (credit cards at 22%, personal loans at 12%) return the most — often $2,000–$10,000+ per $10K balance. Low-APR mortgages return less because tax deductions and lost investment returns eat into savings.
Should I make biweekly instead of monthly payments?
Biweekly = 26 half-payments/yr = 13 full monthly payments (one extra). On a 30-yr mortgage this shaves ~5–7 years and saves tens of thousands. Same effect as adding 1/12 of your monthly payment as extra principal each month.
Does paying extra reduce my monthly payment?
No — it reduces the TERM. Your required monthly payment stays the same; you just finish sooner. If you want the payment itself lower, you need to refinance or recast the loan.
How do I calculate my loan payoff date?
This calculator does it: enter balance, APR, and monthly payment. We simulate month-by-month until the balance hits zero.
Is it better to pay off debt or invest?
Compare APR to your realistic after-tax investment return. Above ~7% APR, pay off debt. Below 4%, invest instead. In between, split. Credit cards ALWAYS come first — no investment reliably beats 22%.
Can I pay off a loan with a lump sum?
Yes, and it's the single most powerful move. A $5K lump payment on a 6% $200K mortgage saves ~$15K in future interest and shaves ~1 year off the term.
Do I need to notify my lender that extra payments go to principal?
Yes — write 'apply to principal' on the memo, or select 'principal-only payment' in the online portal. Otherwise many lenders apply it to next month's payment instead.
Are there prepayment penalties?
Almost never on US mortgages originated after 2014 (Dodd-Frank restricts them). Common on subprime auto loans and some private student loans — check your loan agreement first.
How this calculator is built
Independently maintained
Written by Sam Doshi and the RevenueLab editorial team. We don't sell the data feeds this tool is built on.
Sourced from primary data
Benchmarks come from public AdSense / Stripe / IRS disclosures and reader-submitted data — never third-party "$X per view" claims. Full methodology.
Last reviewed
July 2026. We re-check every figure on the platform on a rolling quarterly cycle.
Editorial standards
See our editorial policy and disclaimer. Results are estimates, not advice.