Extra debt payments: how much interest an extra payment saves
Short answer: Paying more than the minimum reduces the balance sooner, so less interest builds up on it. Each extra dollar is worth the debt's interest rate for as long as it would otherwise have been owed.
| Time to clear | Total interest | Total paid | |
|---|---|---|---|
| Regular payment only | 5 yr 7 mo | $5,238 | $13,238 |
| With the extra | 3 yr | $2,649 | $10,649 |
Assumes a fixed rate and no new borrowing.
An illustration under the assumptions listed below, not a forecast and not personal advice.
What problem does it address?
A debt on minimum payments can take far longer and cost far more than expected. This shows the difference an extra amount makes, before choosing whether to pay it.
How does it work?
- Interest is charged each month on the balance at the yearly rate divided by twelve.
- The payment first covers that interest; the rest reduces the balance.
- An extra payment goes entirely to the balance, so the next month's interest is lower.
Key terms
- APR. The yearly rate the lender charges on the balance.
- Total interest. Everything paid beyond the amount borrowed.
- Opportunity cost. Money used for the extra payment is not available for saving or investing. This page does not model that trade-off.
What are the benefits?
- Shows the interest saved and months cut in plain numbers
- Works for cards, personal loans and similar fixed-rate debt
What are the risks and limits?
- Pulls cash away from emergency savings if overdone
- Some loans charge a fee for early repayment
- Variable rates change the result
What does the simulator assume?
- The rate stays fixed
- No new borrowing and no fees
- Payments are made at the end of each month
Different assumptions give different results. A figure here is a projection under these assumptions, not a prediction.
Where to read more
- Consumer Financial Protection Bureau: Consumer guides on savings accounts, deposit products, loans and paying down debt.
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Frequently asked questions
What if my payment is too low?
If it does not cover the monthly interest the balance never falls, and the page says so instead of showing a date.
Should I pay extra or invest instead?
This page shows only the debt side. Comparing with investing depends on the rate you would earn, which is uncertain; the Goal check lets you see the budget effect of each choice.
Put your income, spending and goals into the Goal check to see how a plan sits against what you have left each month. Free, no bank sync.
Open the Goal checkThis page is for education. It shows what a strategy does under stated assumptions and is not personal investment advice.