How Making Extra Loan Payments Saves You Thousands

Making extra payments on your loan—even small ones—can significantly reduce your total interest and shorten your payoff timeline. This strategy works for mortgages, car loans, student loans, and personal loans.

Before you begin, test how your extra payments affect your payoff time using our Loan Payoff Calculator.

Why Extra Payments Work

When you make an extra payment toward the principal, your loan balance decreases faster. Because interest is calculated based on the remaining balance, reducing the principal early has a compounding effect—saving you far more interest over time than the amount you paid extra.

Types of Extra Payments

• Monthly extra payments: Add a fixed amount each month.
• Biweekly payments: Make half-payments every two weeks, resulting in one extra full payment per year.
• Lump-sum payments: Use tax refunds, bonuses, or extra savings to reduce your balance.

Should You Pay Extra Toward Loans or Invest Instead?

Sometimes investing extra money may yield better long-term gains—especially if your loan interest rate is lower than the growth rate of your investments.

Use our Investment Calculator to compare how much your money could grow if invested instead of applied to your loan.

A good rule of thumb:

• If your loan rate is high (7%+), extra payments are usually better.
• If your loan rate is low (3–5%), investing may offer higher returns.

How Extra Payments Impact Your Financial Future

Paying off debt early gives you:

• More financial freedom
• More cash flow for investing
• Less long-term financial stress
• A stronger net worth

The earlier you start making extra payments—even small ones—the larger the long-term impact.

Try It Yourself

Enter your loan details into the Loan Payoff Calculator to see how extra payments change your payoff date.

Then compare that with potential investment growth using the Investment Calculator .

Small extra payments can transform your financial future—starting today.