Personal Loan Prepayment Calculator – Early Payoff Savings
Calculate savings from personal loan prepayments
Table of Contents
How to Use
- Enter your current loan balance
- Enter your annual interest rate
- Enter your current monthly payment
- Enter the prepayment amount (one-time or monthly)
- Select prepayment type and click calculate
Benefits of Loan Prepayment
Making extra payments on your personal loan can significantly reduce the total interest you pay and help you become debt-free faster. Even small additional payments can make a big difference over time.
- Reduce total interest paid over the life of the loan
- Shorten your loan term and become debt-free sooner
- Build financial freedom and reduce monthly obligations
- Improve your debt-to-income ratio
- Free up money for other financial goals
Prepayment Strategies
There are several ways to make extra payments on your personal loan:
- Make a lump-sum payment when you receive a bonus or tax refund
- Add a fixed extra amount to each monthly payment
- Round up your payment to the nearest $50 or $100
- Make bi-weekly payments instead of monthly
- Apply any windfalls directly to your loan principal
Before Making Prepayments
While prepaying your loan can save money, consider these factors first:
- Check for prepayment penalties in your loan agreement
- Ensure you have an emergency fund before making extra payments
- Pay off higher-interest debt first (credit cards, etc.)
- Consider if the money could earn more invested elsewhere
- Maintain retirement contributions before accelerating debt payoff
Frequently Asked Questions
- What is the difference between one-time and monthly prepayments?
- A one-time prepayment is a single lump-sum payment applied to your principal immediately. Monthly prepayments are extra amounts added to each regular payment, providing consistent acceleration of your payoff.
- How do I ensure my extra payment goes to principal?
- Contact your lender and specify that extra payments should be applied to principal, not future payments. Some lenders have online options to designate payment allocation.
- Are there penalties for paying off a personal loan early?
- Some personal loans have prepayment penalties, especially in the first year or two. Check your loan agreement or contact your lender to confirm before making extra payments.
- Should I prepay my loan or invest the money?
- Compare your loan interest rate to expected investment returns. If your loan rate is 10% and you expect 7% investment returns, prepaying the loan provides a guaranteed 10% 'return' through interest savings.