Loan Prepayment Calculator US
See how much interest and time you save by making a one-time prepayment on your loan.
How it works
Compound interest earns returns on both your original money and the returns already added. Adding a regular monthly contribution accelerates growth further over time.
A = P(1 + r/n)^(nt) + contributions compounded monthly- Longer time horizons benefit most from compounding
- More frequent compounding gives slightly higher growth
- The donut shows how much of your final balance is interest vs money you put in.
Frequently asked questions
Does prepaying a loan really save money?
Yes. Extra principal reduces the balance interest is charged on, lowering total interest and often shortening the loan.
When is the best time to prepay?
As early as possible. Early payments remove the most future interest because they apply for the longest remaining time.
Does prepayment reduce my term or my payment?
It depends on the lender. Some shorten the term while keeping the payment; others lower the payment over the original term. Confirm which applies.
Are there penalties for prepaying?
Some loans charge prepayment penalties, though standard mortgages often do not. Check your loan agreement before making large extra payments.
Should I prepay or invest the money instead?
That depends on your loan rate versus expected investment returns and your goals. It is a personal decision — consider speaking with a financial professional.
How do I make sure extra payments go to principal?
Tell your lender the extra amount is for principal, and check your statement to confirm it was applied to the balance rather than future interest.
How prepaying a loan saves money
A prepayment is any extra amount you pay toward your loan principal beyond the scheduled payment. Because interest is charged on the outstanding balance, reducing that balance early cuts the total interest you pay — and can either shorten your loan or lower future payments.
Why early prepayments matter most
In an amortising loan, early payments are mostly interest and only a little principal. Putting extra money toward principal early therefore removes future interest charges on that amount for the rest of the term, which is why a prepayment in year one saves far more than the same amount in the final year.
Worked example
On a $200,000 30-year mortgage at 6%, adding just $200 a month to the principal can shorten the loan by roughly six years and save tens of thousands in interest — the calculator shows the exact figures for your loan and extra payment.
Things to check first
Confirm whether your lender charges a prepayment penalty (common on some loans, rare on standard mortgages), and whether extra payments reduce the term or just the payment. Make sure the lender applies the extra to principal, not to future interest or the next due date.
Results are estimates for general guidance in United States and may not reflect the latest local rates, fees or rules. Check official sources before making decisions.