Early Repayment Calculator - How Much Interest You Save by Prepaying

Paying off your loan early can cost you money - and save you thousands

A $50,000 prepayment on a $280,000 mortgage at 7.5% with 20 years remaining saves $87,412 in interest when you shorten the term. Choose to lower the payment instead: the saving drops to $34,876. And if your lender charges a 3% prepayment penalty, $1,500 disappears before the math even starts. The right choice depends on your rate, your remaining term, and what you need more - time or cash flow.

Before prepayment

Balance: $280,000

Rate: 7.5%

Remaining: 240 months

Payment: $2,258/mo

Total interest left: $261,878

After $50,000 prepayment (shorten term)

New balance: $230,000

Payment: $2,258/mo (unchanged)

New term: 168 months (6 years shorter)

Total interest left: $174,466

Saved: $87,412

How to use this calculator - step by step

Current loan balance ($) - the remaining principal, not the original loan amount. Check your latest statement or banking app.
Annual interest rate (%) - your current nominal rate. For variable rates, use today's rate.
Remaining payments (months) - how many months until full repayment.
Payment type - fixed (same every month) or declining (decreasing over time).
Prepayment amount ($) - the lump sum you plan to pay above the regular instalment.
Prepayment effect - shorten the term (bigger savings) or lower the payment (immediate relief).
Prepayment penalty (%) - fee charged by the lender, typically 0-3%. Set to 0 if none.
Read the results - before/after comparison table, interest saved, months shortened or payment reduced.

Rule of thumb: Shortening the term always saves more interest than lowering the payment. A $50,000 prepayment on a $280,000 / 7.5% / 20-year mortgage saves $87,412 when shortening vs $34,876 when lowering. The difference: $52,536.

How prepayment size affects savings

Reference scenario: $300,000 balance, 7% rate, 25 years remaining, fixed payments, shorten term, no penalty.

Prepayment	Interest saved	Term shortened	Savings per $1 prepaid
$10,000	$21,407	18 months	$2.14
$25,000	$48,218	39 months	$1.93
$50,000	$82,954	68 months	$1.66
$100,000	$135,892	117 months	$1.36

The marginal return decreases as the prepayment grows - the first $10,000 saves $2.14 per dollar, while the $100,000 level averages $1.36. Early, smaller prepayments are proportionally more efficient.

Practical examples

$200,000 balance, 6.5%, 180 months left, $30,000 prepayment, shorten term - saves $37,891 in interest and cuts 38 months (over 3 years) off the loan. The payment stays at $1,742/month.

Same loan, lower payment instead - the payment drops from $1,742 to $1,482 (saving $260/month), but total interest saved is only $15,647. The term stays at 180 months.

$400,000 balance, 8%, 300 months left, $80,000 prepayment, 2% penalty, shorten term - gross saving: $194,712. Penalty: $1,600. Net saving: $193,112. Term shortened by 93 months (nearly 8 years). The penalty is negligible relative to the interest saved.

$50,000 personal loan, 11%, 48 months left, $15,000 prepayment, shorten term - saves $5,238 in interest. Term drops from 48 to 31 months. On a smaller, shorter loan, the savings are proportionally smaller but still meaningful.

$150,000 balance, 3.5%, 240 months left, $40,000 prepayment, shorten term - saves $22,416 and cuts 72 months. At low rates, prepayment still helps - but the savings per dollar prepaid are smaller than at higher rates. Consider whether investing the $40,000 at a higher return is a better use of capital.

FAQ - Frequently asked questions

Should I shorten the term or lower the payment?

Shortening the term always saves more interest because the principal is repaid faster and has less time to accrue interest. On a $280,000 / 7.5% / 20-year loan, a $50,000 prepayment saves $87,412 when shortening vs $34,876 when lowering - a $52,536 difference. Choose lower payment only if you need immediate cash flow relief (e.g. reduced income, upcoming expenses).

Is the prepayment penalty worth paying?

Almost always yes, for large prepayments. A 3% penalty on $50,000 = $1,500. The interest saved is typically $30,000-90,000 depending on the rate and remaining term. The penalty is a small fraction of the benefit. The only case where the penalty might outweigh the saving: very short remaining terms (under 2 years) or very low interest rates (under 3%).

Is it better to prepay early or late in the loan?

Early is always better. In the first years of a fixed-rate loan, most of your payment goes to interest. A $30,000 prepayment in year 2 of a 25-year mortgage saves roughly twice as much interest as the same prepayment in year 15. The reason: the principal reduction has more years of compounding ahead of it.

Should I prepay a low-interest loan?

It depends on your alternatives. If your loan rate is 3.5% and you can invest at 7% after tax, investing the money generates more wealth than prepaying. But if your best alternative is a savings account at 2%, prepaying the 3.5% loan is the better financial move. Also consider risk: loan repayment is a guaranteed return, while investment returns are uncertain.

Can I prepay part of my loan without penalty?

Many jurisdictions limit prepayment penalties. In the EU, variable-rate mortgages after 3 years typically have 0% penalty by law. In the US, most conventional mortgages have no prepayment penalty, but some subprime or jumbo loans may. Always check your loan agreement for the specific terms. Some lenders allow a certain percentage (e.g. 10-20%) annually without penalty.

What about regular monthly overpayments instead of a lump sum?

Regular overpayments work the same way but spread the prepayment over time. An extra $500/month on a $300,000 / 7% / 25-year loan shortens it by 9 years and saves $142,000 in interest. The advantage: you do not need a large sum upfront. The disadvantage: the savings accumulate gradually, and each dollar paid later saves less than a dollar paid earlier.

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