Loan Repayment Calculator
Calculate your monthly loan payments, total interest costs, and see how extra payments can accelerate payoff. Works for mortgages, auto loans, personal loans, and student loans.
How Does Loan Amortization Work?
Loan amortization spreads your debt repayment across fixed monthly installments that include both principal and interest. In early payments, most of your money goes toward interest while a smaller portion reduces the principal balance. Over time, this ratio flips - later payments have larger principal portions as the remaining balance shrinks.
Understanding this structure reveals a key insight: extra payments early in the loan term have outsized impact on total interest savings. Paying an additional $100 monthly in year one of a mortgage saves significantly more than the same payment in year 25 because you're reducing principal that would have accrued interest for decades.
The Loan Payment Formula Explained
The standard amortization formula calculates your fixed monthly payment based on three inputs: principal amount, interest rate, and loan term. Here's how it works mathematically:
Loan Payment Formula:
M = P × [r(1+r)^n] / [(1+r)^n - 1]
Where:
- M = Monthly payment
- P = Principal (loan amount)
- r = Monthly interest rate (annual rate ÷ 12)
- n = Total number of payments (years × 12)
For a $200,000 loan at 6.5% for 30 years: r = 0.065/12 = 0.00542, n = 360 payments. The monthly payment calculates to approximately $1,264. Over 30 years, you'd pay $455,000 total - meaning $255,000 in interest, more than the original loan!
Interest Rate vs. APR: Understanding the Difference
The interest rate is the base percentage charged on your principal. APR (Annual Percentage Rate) includes the interest rate plus origination fees, closing costs, and other lender charges expressed annually. When comparing loan offers, APR provides a more accurate picture of true borrowing costs since it captures these additional expenses.
How Extra Payments Reduce Total Interest
Extra payments bypass the amortization schedule by going directly to principal reduction. When you pay $200 extra, that entire amount decreases your balance - unlike regular payments where most goes to interest initially. This creates a compounding effect: lower principal means less interest next month, which means more of your regular payment goes to principal, accelerating payoff further.
| Extra Payment | Interest Saved* | Years Saved | New Payoff |
|---|---|---|---|
| $0/month | $0 | 0 | 30 years |
| $100/month | $46,000 | 4.5 years | 25.5 years |
| $200/month | $77,000 | 7.5 years | 22.5 years |
| $500/month | $134,000 | 14 years | 16 years |
*Based on $200,000 loan at 6.5% for 30 years
Bi-Weekly Payments: Another Acceleration Strategy
Instead of 12 monthly payments, bi-weekly payments mean 26 half-payments annually - equivalent to 13 full monthly payments. That extra payment each year goes entirely to principal, shaving approximately 4-5 years off a 30-year mortgage without significantly increasing your budget. Some lenders offer bi-weekly payment programs, or you can simply make one extra payment yearly.
Lump Sum Payments vs. Monthly Extra
Applying a tax refund or bonus as a lump sum principal payment creates instant interest savings. A $5,000 lump sum payment in year 5 of our example mortgage saves approximately $15,000 in interest over the remaining term. The key is ensuring your lender applies extra payments to principal rather than prepaying future installments - always specify "apply to principal" when making extra payments.
Types of Loans and Their Interest Structures
Different loan types have varying interest structures, terms, and prepayment options. Understanding these differences helps you choose wisely and optimize repayment strategies.
Fixed-Rate vs. Adjustable-Rate Loans
Fixed-rate loans maintain the same interest rate throughout the term, providing predictable payments ideal for long-term planning. Adjustable-rate loans (ARMs) start with lower rates that adjust periodically based on market indices. ARMs can be advantageous if you plan to sell or refinance before rate adjustments, but carry risk of payment increases.
Secured vs. Unsecured Loans
Secured loans (mortgages, auto loans) use collateral that lenders can seize if you default, typically offering lower interest rates. Unsecured loans (personal loans, credit cards) have no collateral requirement but charge higher rates to compensate for increased lender risk. Our mortgage calculator handles home loan specifics, while our auto loan calculator focuses on vehicle financing.
Loan Repayment Strategies to Pay Off Debt Faster
Beyond extra payments, several strategies can accelerate your path to being debt-free while maintaining financial stability.
Refinancing to a Shorter Term
Refinancing from a 30-year to 15-year mortgage significantly reduces total interest, though monthly payments increase. If rates have dropped since your original loan, refinancing might lower your rate while shortening the term, potentially keeping payments similar. Factor in closing costs when calculating if refinancing makes financial sense for your situation.
For comprehensive debt management, use our debt payoff calculator to compare the avalanche method (highest interest first) versus snowball method (smallest balance first). Both strategies have merits depending on your psychological approach to debt elimination.
This calculator provides estimates based on standard amortization formulas. Actual loan terms vary by lender, credit profile, and loan type. Consult with financial professionals before making major borrowing or prepayment decisions that affect your overall financial plan.
Last Updated: January 2026 | Reviewed for accuracy