Watch your interest shrink and your payoff date accelerate with extra payments.
Calculation Methodology
This section explains how the calculator processes your loan data.
Monthly Payment Formula
Your monthly payment is determined using the standard amortization formula:
M = P × [r(1 + r)^n] / [(1 + r)^n − 1]Where:
- M = Monthly payment
- P = Loan principal
- r = Monthly interest rate (annual rate ÷ 12)
- n = Number of total payments (loan term in years × 12)
Interest & Principal Breakdown
Each payment is divided as follows:
- Interest = Remaining Balance × Monthly Interest Rate
- Principal = Monthly Payment − Interest
- New Balance = Previous Balance − Principal
How Extra Payments Help
Any extra amount is applied straight to the principal, which:
- Lowers your balance more quickly
- Reduces total interest paid
- Shortens the loan length
- Can save considerable money over time
Payment Frequency Options
To compare different schedules, all frequencies are converted to monthly equivalents:
- Monthly = 1 payment per month
- Bi-weekly ≈ 2.17 payments monthly (26 ÷ 12)
- Annual = 1 payment every year
References
Based on:
- Standard amortization concepts
- CFPB loan guidance
- Federal Reserve interest rate standards
Note: Results are estimates. Real payments may differ depending on lender rules and timing.