Compare different loan repayment strategies and see how extra payments, biweekly payments, or early payoff can save you money and time.
The way you repay your loans can dramatically impact how much you pay in total and how quickly you become debt-free. This calculator helps you compare various repayment strategies to find the most effective approach for your financial situation.
Even small changes to your payment strategy can result in significant savings over the life of a loan. Understanding these options empowers you to make informed decisions about your debt management.
Predictable payments but highest total interest cost
Reduces loan term and total interest significantly
Equivalent to 13 monthly payments per year
| Extra Payment Amount | On $25,000 Loan (6.5%, 10 years) | Time Saved | Interest Saved |
|---|---|---|---|
| $25/month | 9.2 years | 10 months | $1,250 |
| $50/month | 8.5 years | 1.5 years | $2,350 |
| $100/month | 7.3 years | 2.7 years | $4,100 |
| $200/month | 5.8 years | 4.2 years | $6,800 |
| Strategy | Best For | Pros | Cons |
|---|---|---|---|
| Standard Repayment | Tight budgets | Predictable, lowest payment | Highest total cost |
| Extra Monthly Payments | Steady extra income | Flexible amount, major savings | Requires budget discipline |
| Biweekly Payments | Biweekly paychecks | Automatic, no extra money needed | Less flexibility |
| Lump Sum Payoff | Inheritance, bonus | Immediate debt freedom | Large cash requirement |
Where M = monthly payment, P = principal, r = monthly rate, n = number of payments
Where B = balance, P = principal, p = payments made, n = total payments
Monthly Extra Payments: Consistent additional amount each month provides steady acceleration and is easy to budget for.
Annual Extra Payments: Use tax refunds, bonuses, or annual windfalls to make large additional payments once per year.
One-Time Payments: Apply inheritance, insurance settlements, or other lump sums directly to principal.
Graduated Payments: Increase extra payments annually as income grows or other debts are eliminated.
| Consider This | Choose Extra Payments If | Choose Biweekly If |
|---|---|---|
| Cash Flow | Variable income, want flexibility | Steady biweekly paychecks |
| Savings Amount | Can afford substantial extra payments | Want automatic acceleration |
| Discipline | Good at sticking to plans | Prefer automated approach |
| Other Debts | Only this loan remaining | Multiple loans to accelerate |
Interest Rate Environment: In low-rate environments, consider investing extra money instead of accelerating loan payments.
Tax Implications: Some loan interest is tax-deductible (mortgages, student loans), which affects the real cost of the debt.
Opportunity Cost: Compare loan interest rate to potential investment returns to optimize financial strategy.
Emergency Fund Priority: Ensure you have 3-6 months of expenses saved before aggressively paying down low-interest debt.
Not specifying principal: Extra payments must be applied to principal, not interest, to be effective.
Ignoring higher-rate debt: Pay minimum on low-rate loans while focusing extra payments on high-rate debt.
Sacrificing emergency funds: Don't compromise financial security for faster loan payoff.
Forgetting tax benefits: Consider the after-tax cost of debt when making repayment decisions.