Personal Loan Calculator

Monthly payment = A × r ÷ (1 − (1 + r)^−n), where A is the amount borrowed, r the monthly rate and n the term in months. Payoff amount after k payments is the balance on the schedule at month k. Interest saved = (interest over the full term) − (interest paid up to month k).

A

The amount borrowed

r

The monthly interest rate: the annual rate divided by twelve

n

The term in months

k

The month you settle the loan in

payoffAmount

What is still owed at the end of month k — the figure a settlement has to cover

interestSaved

Interest that the loan would have charged after month k and no longer will

Use it when you are deciding whether to clear a personal loan with money you have, and use the saving column rather than the balance: the amount to settle tells you what you need, and the interest saved tells you what you get for spending it. Run two or three settlement months and compare. On the default loan, settling at month 12 saves 4,253.24 while settling at month 36 saves 1,166.00 — the same money handed over three years apart buys 3,087.24 less, because three more years of interest has already been paid. That is the whole decision: if a loan is going to be settled early, most of the benefit is at the front, and a settlement in the last year of a five-year loan is barely worth the paperwork. If your rate is low enough that the saving looks small, the money may be worth more somewhere else entirely.

1. 20,000 at 11.5% over five years, settled after two years

   1. Monthly rate: 11.5 ÷ 12 = 0.9583333%, which is 0.009583333 as a decimal
   2. Monthly payment: 20,000 × 0.009583333 ÷ (1 − 1.009583333^−60) = 439.85
   3. After 24 payments the balance is 13,338.60, which is the amount to clear the loan
   4. Interest paid over those 24 months: 3,895.00
   5. Interest if the loan runs the full 60 months: 6,391.14, so settling now avoids 6,391.14 − 3,895.00 = 2,496.14
   6. Term served: 24 ÷ 60 = 40%, leaving 36 months

   The default case. Two figures answer two different questions: 13,338.60 is what you need in hand to clear the loan at month 24, and 2,496.14 is what having that money buys you. Note that 24 × 439.85 is 10,556.40, so two years of payments have cleared 6,661.40 of principal and 3,895.00 of interest — 37% of what has been paid was interest.

2. The same loan settled after one year

   1. Monthly payment unchanged at 439.85; only the settlement month moves
   2. After 12 payments the balance is 16,859.70
   3. Interest paid over those 12 months: 2,137.90
   4. Interest avoided: 6,391.14 − 2,137.90 = 4,253.24
   5. Term served: 12 ÷ 60 = 20%, leaving 48 months

   One year earlier and the saving is 4,253.24 instead of 2,496.14 — 1,757.10 more for handing over 3,521.10 more money, because the balance is higher but far less interest has been paid. Compare this row with the previous one and the shape of the decision appears: the saving falls fast as the settlement month moves later, and it is not proportional to the balance you clear.

3. The same loan settled after four years

   1. After 48 payments the balance is 4,963.73 — a quarter of the loan is still outstanding
   2. Interest paid over those 48 months: 6,076.53
   3. Interest avoided: 6,391.14 − 6,076.53 = 314.61
   4. Term served: 48 ÷ 60 = 80%, leaving 12 months
   5. The 6,076.53 already paid is 95.1% of the loan's total interest

   The other end of the same curve. Four years in, 95.1% of the interest has been paid and a quarter of the principal is still owed, so clearing the loan early saves 314.61 — less than one monthly payment, for finding 4,963.73. Read this next to the first-year case and the front-loading of interest stops being an abstraction: the same loan rewards an early settlement thirteen times more than a late one.

The amount to clear is the balance on the schedule at the end of the month you chose, not a lender's settlement quote. A real quote is usually calculated to a specific day and may include interest accrued since the last payment, so expect it to be slightly higher than the figure here — ask for it in writing and in a form that stays valid for a stated number of days. No prepayment penalty is modelled, and some personal loans have one: a charge of a few months of interest, or a fixed fee, can wipe out everything the savings column shows, and where a penalty exists it is usually payable precisely in the early months when the saving is largest. Origination fees, late charges and any payment protection product are also outside the arithmetic. The rate is assumed fixed for the whole term, and the payment is assumed to be made in full and on time every month with nothing added to the balance. The term is capped at 120 months — which is also why a loan this page can model always has a payment large enough to clear the interest each month, so you will never see it refuse to produce an answer. Amounts carry no currency symbol.

How much does it cost to pay off a personal loan early?

The balance at the month you settle, which is what the settlement figure covers. On 20,000 at 11.5% over five years, settling after two years costs 13,338.60; settling after one year costs 16,859.70; settling after four years costs 4,963.73. There is nothing extra in this model — but check your own agreement for a prepayment penalty, because where one exists it is charged on top.

How much interest do I save by settling early?

It depends entirely on when. On the default loan the total interest is 6,391.14, and settling at month 12 avoids 4,253.24 of it, at month 24 avoids 2,496.14, at month 36 avoids 1,166.00 and at month 48 avoids 314.61. At month 12 two thirds of the loan's whole interest charge is still ahead of you — 4,253.24 of 6,391.14 — and by month 48 almost none of it is.

Why does settling near the end of the loan save so little?

Because most of the interest has already been paid. At month 36 you have served 60% of a five-year term and paid 81.8% of the loan's total interest; at month 48 you have paid 95.1%. The remaining payments are almost entirely principal, so cancelling them removes almost no interest. The saving follows the interest, not the balance.

Does settling on the last payment save anything?

Nothing at all, and the page returns zero rather than a small number. Enter a settlement month equal to the term and the interest saved is 0, because the loan has already charged everything it was going to charge. The useful range is the first half of the term; after the halfway point you are paying money early for very little.

What if the loan has no interest at all?

Then there is nothing to save and the page says so: at 0% the monthly payment is the amount divided by the term, the interest figures are all zero, and settling early only moves the balance — 16,000.04 after twelve payments on 20,000 over five years. A zero-rate loan is the one case where paying it off early has no financial argument either way.

• 12 CFR 1026.17 — General disclosure requirements for closed-end credit: what a lender has to put in writing before a personal loan is signed — Electronic Code of Federal Regulations, Office of the Federal Register (United States)
• 12 CFR 1026.4 — Finance charge: which charges count as the cost of credit, and therefore as the interest this page is trying to reduce — Electronic Code of Federal Regulations, Office of the Federal Register (United States)