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Loan Payoff Calculator: How to Pay off Your Loan Faster

Michaela Wilbanks • September 6, 2023

Looking to pay off your loans faster? Check out these simple tips and tools, including a loan payoff calculator, that can help you save money and get out of debt sooner.

If you ever plan on owning a home or opening a business,  you’ll likely need to take out a loan. A loan is money you borrow from a bank or other financial institution to help manage large expenses or unexpected emergencies. In exchange, you repay the debt over a set period. 

A loan payoff calculator can help you compare monthly payments, loan terms, and interest rates while shopping for a loan. It’s also useful to find cost- and time-efficient ways to manage existing loans. 

Whether you’re balancing your budget, looking to make a big purchase, or researching the best ways to get out of debt fast, Chime’s loan payoff calculator can help you find the best loan payment plan to help you achieve your financial goals.

Loan payoff calculator

To use our loan payoff calculator, simply enter your principal loan amount, monthly interest rate, and the amount you’d like to pay per month or the number of months you’d like to contribute to your loan to find a payment plan that works for you. 

Loan Payoff Calculator

Input either your monthly payment amount or payoff time frame, not both

Monthly payment Payoff time frame

The monthly payment amount is currently smaller than the monthly accrued interest.


Add extra payments (optional)

Calculate how extra contributions can impact your estimated payoff date and total interest accrued.

Input either your monthly payment amount or one-time payment, not both

Monthly payment One-time payment

Exact monthly payment:

$XXX.XX

Time to payoff:

16 months

Loan payoff date:

September 2024


Total principal paid:

$XXX.XX

Total interest paid:

$XXX.XX

Total amount paid:

$XXX.XX


Alternate payoff scenarios:

Months

Monthly payment


Download amortization schedule
Payment Payment amount Interest Paid Principal Balance

This calculator is for educational purposes only. It calculates the amount you may need to pay per month to pay off your loan balance, based on the information you provide. The estimates do not include any potential fees, and your results assume you won’t add more to your loan balance. You should enter figures that are appropriate to your individual situation. The purpose of this calculator is not to offer any tax, legal, financial, or investment advice.

How to calculate your monthly loan payment

To calculate your minimum monthly loan payment, you’ll need to know how much you borrowed, the interest rate, and the loan terms on hand. 

  • Principal: The total amount you borrowed from your bank or lender. For example, if you borrowed $500,000 to purchase your home, your principal is $500,000.
  • Loan term: How long your lender will allow you to repay your loan. Your loan terms may vary based on the type of loan you have. For example, the term for a personal loan may be as short as one-to-two years, while a mortgage can run upward of 30 years. 
  • Interest rate: The amount of money your lender charges you for the loan. Your interest rate is usually a percentage of your principal, based on factors like your credit score and loan term length. The higher the interest rate, the more you’ll spend monthly. 

The formula to determine your monthly payment will depend on the type of loan you took out. Some loans begin as interest-only loans, where the first period of your loan term goes toward paying off your interest. The formula to calculate monthly payments during the interest-only period is:

Principal x (interest rate ÷ 12) = monthly payment

Let’s say you applied for a $300,000 mortgage. Your lender offers you a 5% interest rate for your loan amount, with an interest-only period of 10 years. To find your monthly loan payment, follow these steps:

1. Divide your APR by 12 since you’ll make 12 monthly payments in a year:

5% ÷ 12 = 0.00417

2. Next, multiply that amount by your principal to get your monthly payment during the interest-only period:

0.00417 x 300,000 = $1,251

Once the interest-only period ends, most loans turn into amortizing loans. Like personal loans and auto loans, you pay amortizing loans in regular installments over a specific duration. 

The formula to calculate monthly payments for an amortizing loan is much more complicated than that of an interest-only loan. You must factor in the number of months in your loan term and your principal and interest rate to account for compounding interest

Principal ÷ { [ (1+interest rate)loan term] – 1 } ÷ [interest rate (1+ interest rate)loan term] = monthly payment

This formula can be difficult to work with – just writing it out can give you flashbacks to Algebra II. Luckily for you, our loan payoff calculator focuses on amortizing loans. 

You can even download the amortization schedule to understand how varying interest rates and principal amounts comprise each level of payment throughout your loan term.

How to pay off your loan faster

Six illustrations accompany a list of six ways to pay off your loan faster.

22 million Americans have a personal loan debt – and we owe about $210 billion altogether.¹ While this number may seem quite high, loans are just another part of day-to-day finances to account for while maintaining your financial health. 

You should prioritize your regular monthly payments, however, you don’t have to stick to the minimum amount. Ideally, you can pay off your credit card, mortgage, or auto loans quicker and save on total interest. Just ensure there aren’t any penalties and fees your lender might apply for making extra or early payments.

We recommend these tried-and-true techniques if you’re willing and able to pay off your loan faster:

Swap monthly for biweekly payments

Paying half your monthly loan payment every two weeks is a foolproof way to lessen the interest accrued on your loan without feeling like you’re spending more per month. 

With this method, you’ll make 26 half-payments a year, which equals a full extra monthly payment. You could shorten your loan term by several months or years!²

Pay off your most expensive loan first

If you’re paying off more than one loan, focus on the highest interest rate first and work your way down. This “avalanche method” will reduce the overall amount of interest you pay on your loans and decrease your overall debt. Just remember to pay the minimum monthly payments on your other loans to avoid any late fees or penalties. 

Pay off your smallest balance first

As opposed to the avalanche method, the snowball method prioritizes paying off the loans with the smallest amount first. Seeing all those smaller accounts reach zero fast can help build confidence and momentum as you progress toward your largest loan. 

Round up to the nearest $50

Rounding up your monthly payments to the nearest $50 is another way to pay off your loans fast. For example, if your minimum monthly car payment is $365, make payments of $400 to shorten the term. The difference is enough to cut a few months off your term and save you a decent amount of interest. 

Put all your extra money towards your loan

Expecting a promotion soon? Congratulations – you’ll be in a great position to start making extra payments on your loan! Side hustles, salary negotiations, and cutting impulse purchases can help you net some extra cash for your debt-free goals. 

Refinance

If interest rates have dropped since you took out your loan or you’ve had a huge boost to your credit, one of the best ways to pay off your loan faster is by refinancing. You may be eligible for a lower interest rate that could save you thousands and allow you to pay off the principal early. 

How does APR affect your monthly payment?

A closeup of a person using an iPhone calculator accompanies the definitions for interest rates vs. annual percentage rate (APR).

An advertised interest rate isn’t the same as your loan’s annual percentage rate (APR), but it’ll affect your monthly payment as well. APR is the total annual cost of a loan to the borrower – in other words, it includes the interest rate and fees charged, and discounts associated with borrowing the loan, like:

  • Mortgage broker fees
  • Transaction fees
  • Discount points
  • Private mortgage insurance
  • Prepaid interest
  • Escrow fees
  • Origination fees
  • Credit report fees
  • Closing costs 

Lenders are not required to include all the loan fees in the APR, so remember to clarify which fees the APR covers.

While people often use “interest rate” and “APR” interchangeably, a loan’s APR will give you a better idea of your total monthly payments and how they align with your financial goals.

What is a good loan rate?

The loan interest rate and APR you receive will depend on several factors – the most important being your credit and financial history. Lenders want to see that you’re responsible with your money and will be able to make monthly payments in full and on time. 

As of April 2023, the average interest rate for a personal loan is 10.82% – but your rate may be higher or lower depending on your unique financial situation.³ Here’s what you can expect for your interest rate, depending on your credit score:

Credit scoreAverage interest rate4
Excellent720-85010.73%-12.50%
Good690-71913.50%-15.50%
Fair630-68917.80%-19.90%
Bad300-62928.50%-32.00%

Other factors that may affect your loan rate include:

  • Your net income
  • Your debt-to-income ratio
  • Your employment status
  • Your loan term
  • The type of lender you borrow from

Leverage a loan payment plan that's right for you

There’s no shortage of loan providers promising the lowest rate or simplest payment schedule. When shopping for loans, take the time to compare apples to apples by weighing the monthly payment options, interest rates, and special features offered – you’ll want to settle for a lender plan that offers competitive interest rates along with flexible repayment options that suit your budget. 

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FAQs about paying off your debts

Still have questions about paying off your loans? Find answers below. 

How do I get a loan?

You can request a personal loan through a traditional bank, credit union, or online lender. Before you apply for a loan, gather all the documents you’ll need for a quick and efficient process, including your personal identification,  proof of income, employer’s information, and proof of residence.

Can I still get a loan with bad credit?

It’s possible to get a loan with bad credit or even no credit at all. Credit builder loans, secured loans, and payday loans are smart options that won’t penalize you for less-than-stellar credit. You can also take out a personal loan with a co-signer or accept the higher rate and refinance when your credit score has improved. 

Is it good to pay off a loan early?

In most cases, paying off your loan early is a smart move (unless your lender charges a prepayment penalty fee). You’ll save money on interest, lower your debt-to-income ratio, and gain peace of mind when living debt-free. However, prematurely closing your loan account may affect your credit goals in the short run since credit age and credit mix impact your score. 

Does your credit score drop when you pay off a loan?

Your credit score may temporarily drop after you pay out a loan. Credit bureaus consider loan accounts closed once you pay off the entire amount. That means your credit mix – the types of different credit accounts you currently have open – may take a hit. However, the drop typically levels out after a few months. 

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1 Information from TransUnion’s Credit Card and Personal Loan Balances Reach Record Levels as Consumers Navigate High Inflation, Rising Interest Rates as of 5/1/2023: https://newsroom.transunion.com/credit-card-and-personal-loan-balances-reach-record-levels-as-consumers-navigate-high-inflation-rising-interest-rates/

2 Information from Bankrate’s Should you make biweekly mortgage payments? as of 5/1/2023: https://www.bankrate.com/mortgages/should-you-make-biweekly-mortgage-payments/

3 Information from Bankrate’s Personal loans interest rate forecast for 2023: Rates to increase due to Fed pressure as of 5/1/2023: https://www.bankrate.com/loans/personal-loans/personal-loan-rates-forecast/

4 Information from Bankrate’s What’s the average personal loan interest rate? as of 5/1/2023: https://www.bankrate.com/loans/personal-loans/average-personal-loan-rates/

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