Loan Payoff Calculator
Monthly payment
$635.99
- Amount financed$20,000
- Total interest$2,896
- Total of payments$22,896
Assumes a fixed rate and equal monthly payments. Fees, insurance and any dealer add-ons are not included.
What a payoff calculator is for
Two questions come up whenever someone borrows a fixed sum: what will it cost each month, and what happens if I overpay? A lender will answer the first. The second — how much time and interest an extra $50 or $100 a month actually buys — is the one worth working out before you commit, because on a short loan the answer is often larger than it looks.
This applies to any fixed-rate instalment loan: a personal loan, a consolidation loan, a student loan on a fixed schedule, or borrowing from family on agreed terms.
A worked example: $20,000 at 9% over three years
Borrow $20,000 at 9% for 36 months and the payment is $635.99. Across the term you repay $22,895.81, so the loan costs $2,895.81 in interest — about 14 cents on every dollar borrowed.
Now add $100 a month. The loan clears in 31 months instead of 36, and total interest drops to $2,450.07, a saving of $445.73. Note what that means for money out of the door: the total repaid falls from $22,895.81 to $22,450.07. Paying more each month costs you less overall, because the five payments you never make more than cover the extra you put in.
The pattern to notice: overpaying a short loan saves months rather than a fortune in interest, because there was not much interest to save. Overpaying a long loan does the opposite. The same $100 a month against a 30-year mortgage saves tens of thousands, because it removes years of compounding rather than months.
How the schedule is built
The scheduled payment uses the annuity formula: payment = P × r ÷ (1 − (1 + r)^−n), with r the monthly rate (the annual rate divided by 12) and n the number of months. From there the calculator walks the loan one month at a time: charge interest of balance × r, put everything else — including any extra payment — against the balance, repeat.
Walking it rather than solving a formula is what makes the overpayment answer exact. The payoff month is the month the balance actually reaches zero, not an estimate, and the interest total is the sum of what was really charged.
Assumptions, and one thing to check with your lender
The model assumes a fixed rate, equal monthly payments, and that each payment arrives on schedule. It excludes origination and arrangement fees, payment protection insurance, and late charges. Where a loan carries an origination fee deducted from the advance, the true cost is higher than the rate suggests — that is what APR is meant to capture, and this calculator works from the note rate, not the APR.
It also assumes extra payments reduce the principal immediately. Some lenders apply overpayments to the next instalment instead, which means you have simply paid early rather than paid down — the interest saving disappears. If you plan to overpay, confirm in writing that it is applied to principal, and check for a prepayment penalty, which is legal on many personal loans.
Questions about paying a loan off
Is it better to overpay every month or save up a lump sum?
Monthly, almost always. Interest is charged on the balance outstanding, so every dollar that comes off early stops accruing from that moment. Holding the money for a year and paying it as a lump sum means paying a year of interest on it first.
Should I pay off a loan or invest the money instead?
Compare the loan rate with the return you would realistically get, after tax, on the alternative. Clearing a 9% loan is a guaranteed 9% return; few investments guarantee anything. Above roughly 6-8% the loan usually wins on the arithmetic alone.
Why does the total interest fall so much when the term shortens?
Because interest accrues per month on whatever is still owed. Ending five months early removes five months of charges on a balance that was still a few thousand dollars, and the effect compounds backwards through the whole schedule.