Loan Payoff Calculator
Calculate Your Loan Interest and Repayments
Save yourself as much interest repayment as you can
Loan repayment involves paying off two core components: the principal (the amount originally borrowed) and the interest charged by the lender. The differences to the amounts you will repay can often be extraordinarily large, especially when calculating interest payments on sizeable principal amounts. (The ‘principal’ is the initial sum of money loaned to you.)
Look even at the following more modest examples. They nonetheless illustrate how paying a little bit extra back a month can make a notable difference in your favor.
Examples
$7500 borrowed over 6 years (72 months) at a 5% rate will lead to your paying back $8668.87. You will have monthly repayments of $120.40. The interest will cost you $1168. This equates to 15.6% of the initial loan amount in interest.
$7500 borrowed over 4 years (48 months) at a 5% rate will lead to your paying back $8272. You will have monthly repayments of £172.20. The interest will cost you $772. This equates to just 10.2% of the initial loan amount in interest.
On the same initial principal, you are saving around $400 in interest by paying $52 a month more, and you are also shortening the length of the loan by 2 years.
Use the Loan Payoff Calculator to explore the differences that can be made to altering the amount you pay back per month. With large loans, like mortgages, the differences can be huge over time, if you make even quite small additional payments per month.
Student Loans
These often get forgotten about, because they are not taken out directly like a personal loan is, but for many people it is student loans that eat into their income.
Use the calculator to work out how much your loan repayments are going to cost you over time. Depending on where you studied and for how long, your debt will vary and the significance of the debt in your life will vary, but the general rule remains the same: do your best to pay it off as soon as you can.
In the UK, however, your debt gets canceled after 25 years, so in that sense you may not feel quite so burdened by it. In addition, in the UK it is means tested, so you will only start paying it back once you hit a salary level above a particular threshold. But once you hit that level – and most do – you will pay back around 10% of your income to your student loans and it will take you a very long time even to clear the interest that has accrued, let alone the capital – or principal – itself.
Use the calculator to work out what those loan repayments do to your ‘take home’ net pay. Play around with different salary levels to see the impact that each one has on your student loan repayments.
Note – in most cases, your Student Loan will come off automatically. You won’t be able to avoid it or schedule it on your own terms. But you will be able to overpay or pay it off, if you can. In the US, where it is not written off, it can be a stress having it hanging over you. Be aware, though, that salaries in the US are notably higher than in the UK.
How to pay down a loan faster
As a rule of thumb with debt, it is best to get rid of it as soon as you can. When it comes to debt, that’s as good a heuristic as any.
However, always check to make sure that paying your debt down does actually work for you. Some lenders have penalties. Others deduct overpayments from the interest and not the capital, or principal figure. In other cases you may overstretch yourself and need to re-borrow.
If you re-borrow with the same lender they will often charge you a higher interest rate and want to add it to the existing loan, which makes the whole loan then more expensive.
Check all this and use our Loan Payoff Calculator to see quite how much overpayment – or extra borrowing under any lender’s quoted rates – would cost you.
Use the Loan Payoff Calculator to see the difference that could be made to making different levels of overpayment. Start by adding $10, for example, to your monthly payment. Then add $20, and see how much difference these figures make over time and by how much they shorten your loan term and the interest you pay.