Loan Payoff Calculator

How this works

The standard payment is computed from the balance, rate and term; then the same balance is re-amortized with your extra added to every payment. The gap in payoff time and total interest is your saving.

Worked example: $200,000 at 6% over 30 years, plus $200/month → paid off roughly 5 years early, saving tens of thousands in interest. Small and steady beats waiting.

Why an extra payment early is worth several later

Interest accrues on the outstanding balance, so a rand of capital repaid today avoids interest for the entire remaining term, while the same rand repaid in year fifteen avoids interest only for what is left. On a twenty-year bond, an extra payment in year one can be worth three or four times the same payment in year twelve. This is why "round the payment up" advice works so disproportionately well on new loans.

The effect is easiest to see in the term rather than the interest: an extra payment does not shrink your monthly obligation, it deletes payments from the far end of the schedule. A modest overpayment on a typical bond frequently removes several years.

Lump sum, monthly extra, or both

A lump sum applied early is the most efficient single action, which makes bonuses, tax refunds and inheritances unusually powerful when directed at debt. A recurring monthly extra is usually the larger force over the life of the loan simply because it accumulates. Comparing both here is worthwhile: many people find that a small permanent increase beats an occasional windfall.

Make sure the extra goes to capital

This is the practical trap. Sending more money does not automatically reduce capital: some lenders apply the excess to the next instalment, effectively putting the loan "in advance" rather than shortening it, and some hold it in a suspense account. The instruction you want, in writing, is that additional payments are applied to capital and the term is shortened rather than the instalment reduced. Check the next statement to confirm the balance actually fell.

Where a loan has an access facility, extra capital paid in may remain redrawable, which is convenient and means the money is not truly committed. That is a feature for some people and a temptation for others.

Prepayment penalties and when to check

Fixed-rate loans sometimes carry early-settlement charges, and some jurisdictions require notice before full settlement — in South Africa, the National Credit Act allows a lender to require up to 90 days' notice on larger agreements, and settling without it can attract an interest charge. Variable-rate home loans usually permit overpayment freely. Read the agreement before making a large lump-sum payment, not after.

When not to overpay

Clearing a 9% bond is a guaranteed 9% return, which is genuinely attractive — but higher-rate debt should be cleared first, an emergency fund should exist before either, and an employer pension match is free money that beats both. Overpaying a cheap loan while carrying an expensive one is the most common ordering mistake.