How to use it
- Enter Loan amount.
- Enter Annual rate %.
- Enter Term (years).
The formula
Extra principal reduces the balance interest is charged on.
Worked example
An extra $200/month on a 30-year loan can save years and tens of thousands in interest.
Frequently asked questions
Where do extra payments go?
Toward principal, which shrinks future interest.
Lump sum or monthly?
Both help; monthly is steadier, a lump sum front-loads the saving.
Tips
- Compare the total interest, not just the monthly payment.
- A larger down payment lowers both the loan and any insurance.
- Even small extra principal payments cut years off the term.
Key terms
- Principal
- The amount borrowed, before interest.
- Amortization
- Spreading repayment into equal periodic payments.
- Escrow
- Funds held for taxes and insurance.