Early Loan Payoff Calculator
See how extra payments help you pay off debt faster and save on interest.
Current Loan
Extra Payments
Tax refund, bonus, etc.
The Power of Extra Payments
Paying off debt early is one of the best financial moves you can make. Extra payments go directly to principal, reducing the balance faster and saving thousands in interest.
Why Extra Payments Work
Your regular payment splits between interest and principal. Early in the loan, most goes to interest. Extra payments reduce principal immediately, meaning less interest accrues in future months. This creates a snowball effect where more of each regular payment goes to principal.
Strategies for Early Payoff
Bi-Weekly Payments: Pay half your monthly payment every two weeks (26 half-payments = 13 full payments per year)
Round Up: Round payments to nearest $50 or $100 (e.g., pay $500 instead of $405)
Windfalls: Apply tax refunds, bonuses, or gifts directly to principal
Budget Review: Find $50-100 in monthly budget to allocate to debt
Side Hustle: Dedicate side income entirely to debt payoff
Which Debts to Pay First?
Avalanche Method: Pay minimums on all debts, extra to highest interest rate. Mathematically optimal.
Snowball Method: Pay minimums on all debts, extra to smallest balance. Psychological wins keep you motivated.
Both work - choose what motivates you most!
Things to Check First
- Verify no prepayment penalties in loan agreement
- Confirm extra payments go to principal, not future payments
- Keep 3-6 months emergency fund before aggressive payoff
- Consider if better to invest if loan rate is very low (<3%)
- Max out employer RRSP match before extra debt payments
Disclaimer
This calculator provides estimates. Actual savings depend on loan terms, prepayment policies, and consistent extra payments. Always verify prepayment rules with your lender before making extra payments.
FAQ
Should I pay off my loan early?
It depends on the interest rate and your other financial goals. If the loan has high interest (>5%), paying it off early saves money. If low interest (<3%), investing extra money might yield better returns.
How much can I save by paying extra?
On a $20,000 loan at 8% over 5 years, paying an extra $100/month saves $1,600 in interest and pays off 14 months early. The higher your rate and balance, the more you save.
Is there a prepayment penalty?
Most personal loans in Canada have no prepayment penalties, but some mortgages and car loans do. Check your loan agreement before making extra payments.
Where should extra payments go?
Extra payments should go toward principal, not future payments. Contact your lender to ensure extra amounts reduce your balance, not advance your due date.
Lump sum or monthly extra payments?
Monthly extra payments are often easier to budget. Lump sums (tax refunds, bonuses) provide big interest savings if made early in the loan term. Both strategies work - consistency matters most.