— Loans & Debt
Loan Prepayment Calculator
Putting extra money against your loan saves interest — often a lot. See exactly how much, and whether to shorten the loan or shrink the payment.
Interest saved
$132,758.77
- Total saved (net of penalty)
- $132,758.77
- New term
- 16 yrs 4 mos
- Payments eliminated
- 104
- Total interest — without prepaying
- $307,686.45
- Total interest — with prepaying
- $174,927.67
- If you cut the term — saved
- $132,758.77
- If you cut the payment — saved
- $63,499.90
— Comparison schedule
| Year | Balance (original) | Balance (prepaying) | Interest saved |
|---|---|---|---|
| Year 1 | $295,046.7 | $270,113.02 | $1,333.68 |
| Year 2 | $289,761.67 | $259,448.93 | $3,112.75 |
| Year 3 | $284,122.7 | $248,070.64 | $5,252.06 |
| Year 4 | $278,106.07 | $235,930.32 | $7,775.74 |
| Year 5 | $271,686.49 | $222,976.95 | $10,709.54 |
| Year 6 | $264,836.98 | $209,156.07 | $14,080.92 |
| Year 7 | $257,528.75 | $194,409.57 | $17,919.18 |
| Year 8 | $249,731.08 | $178,675.48 | $22,255.6 |
| Year 9 | $241,411.18 | $161,887.64 | $27,123.54 |
| Year 10 | $232,534.08 | $143,975.49 | $32,558.58 |
| Year 11 | $223,062.46 | $124,863.74 | $38,598.73 |
| Year 12 | $212,956.52 | $104,472.03 | $45,284.49 |
| Year 13 | $202,173.75 | $82,714.65 | $52,659.1 |
| Year 14 | $190,668.85 | $59,500.14 | $60,768.71 |
| Year 15 | $178,393.45 | $34,730.91 | $69,662.53 |
| Year 16 | $165,295.93 | $8,302.84 | $79,393.09 |
| Year 17 | $151,321.25 | $0 | $89,620.36 |
| Year 18 | $136,410.66 | $0 | $99,017.23 |
| Year 19 | $120,501.49 | $0 | $107,415.51 |
| Year 20 | $103,526.84 | $0 | $114,748.32 |
| Year 21 | $85,415.37 | $0 | $120,944.31 |
| Year 22 | $66,090.94 | $0 | $125,927.34 |
| Year 23 | $45,472.32 | $0 | $129,616.18 |
| Year 24 | $23,472.83 | $0 | $131,924.15 |
| Year 25 | $0 | $0 | $132,758.77 |
— Balance: original vs prepaying
Download— How it works
Each prepayment cuts the principal. Reduce-tenure keeps the payment and recomputes how many remain; reduce-payment keeps the tenure and recomputes the payment on the lower balance.
Why prepaying saves so much
On a long loan, the early years are almost all interest — only a sliver of each payment touches the principal. A prepayment goes straight to that principal, so it removes not just the amount you pay but all the future interest that amount would have generated for the rest of the term. That is why even a modest lump sum early on, or a small recurring top-up, can cut years and a surprising sum of interest off a loan. This calculator shows the original and prepaid balances side by side, and shades the cumulative interest you save in between.
The earlier you prepay, the bigger the effect, because there is more remaining term over which to avoid interest. A prepayment in year one is worth far more than the same amount in year ten.
Worked example — $300,000 at 6.5% with 25 years left, a $20,000 lump sum now plus $300 extra a month: Keeping the payment, the loan finishes about 8 years early and saves roughly $133,000 in interest. Keeping the term instead lowers the payment — easier on monthly cash flow, but it saves much less interest overall.
Reduce the tenure or reduce the payment?
A prepayment can be used two ways, and the choice matters more than most people realise. Reduce the tenure — keep paying the same payment, and the loan simply ends sooner. Reduce the payment — keep the same end date, and your monthly payment drops. Both are valid, but they are not equal: cutting the tenure keeps your money working against the principal for longer, so it almost always saves far more interest. Cutting the payment eases monthly cash flow but leaves more interest on the table.
The calculator shows both outcomes side by side so you can see the trade-off in your own numbers. As a rule of thumb, choose reduce-term if you can comfortably keep the current payment, and reduce-payment only if you need the monthly relief.
Watch the penalty — and the alternative
Some loans carry a prepayment or foreclosure charge, usually a percentage of the amount prepaid. Most floating-rate home loans waive it, but fixed-rate loans and many personal loans do not. Enter the penalty and the calculator nets it against the interest saved, so you can see whether prepaying still pays — it usually does, by a wide margin, but it is worth confirming.
One more thing to weigh: the return on prepaying is effectively your loan’s interest rate, risk-free and tax-considered. If you can reliably earn more elsewhere after tax, investing the money may beat prepaying — but for most borrowers, guaranteeing a high-rate saving is hard to beat.
— Reader questions
Should I reduce the tenure or the payment when I prepay?
Reducing the tenure almost always saves more interest, because you keep paying the same payment and the loan ends sooner — your money works against the principal for longer. Reducing the payment lowers your monthly payment but leaves more interest to pay. Choose reduce-term if you can keep up the current payment; reduce-payment only if you need the monthly cash-flow relief. The calculator shows both.
How much interest does prepaying actually save?
Often far more than the amount you prepay, especially early in the loan, because each prepayment removes all the future interest that principal would have generated. The exact figure depends on your rate, balance and remaining term — enter them above to see interest saved and the new payoff for your loan.
Is it better to prepay early or later?
Earlier is better. The earlier you prepay, the more remaining term there is over which to avoid interest, so the same amount saves more. A lump sum in year one is worth considerably more than the same sum in year ten.
What is a one-time vs a recurring prepayment?
A one-time prepayment is a single lump sum — a bonus or windfall paid against the principal. A recurring prepayment is a smaller amount added on top of your payment regularly. Both cut the principal and the interest; the calculator lets you model either or both together, and even step the recurring amount up each year.
Do I have to pay a penalty to prepay?
It depends on the loan. Most floating-rate home loans allow prepayment with no charge, while fixed-rate loans and some personal loans levy a foreclosure or part-payment fee, typically a percentage of the amount prepaid. Enter any penalty and the calculator nets it against the interest saved to show the true benefit.
Should I prepay my loan or invest the money instead?
Prepaying gives a guaranteed, risk-free return equal to your loan’s interest rate. Investing might earn more, but with risk and after tax. If your loan rate is high, prepaying is hard to beat; if it is low and you can invest well, investing may win. This calculator quantifies the prepayment side so you can compare.