Loan Term Reduction Calculator

Loan Amount

Principal balance at the start.

Annual Interest Rate (%)

Fixed nominal annual rate.

Original Term (Years)

Used to compute the baseline payment.

Payment Frequency MonthlyBi-WeeklyWeekly

Affects rate per period and schedule dates.

First Payment Date

Dates are projected from this payment.

Extra Payment (Before Rounding)

Added to the baseline payment.

Apply Extra Every Every paymentEvery 2 paymentsEvery 3 paymentsEvery 4 paymentsEvery 6 paymentsEvery 12 payments

Controls how often extra principal is added.

Start Extra After (Payments)

Example: 13 starts after one year of payments.

Round Up Total Payment To No roundingNearest 10Nearest 25Nearest 50Nearest 100

Rounds base + extra upward to an increment.

One-Time Lump Sum

Optional principal-only extra payment.

Apply Lump Sum At Payment #

Use 0 to disable.

Calculate Reset

If the scheduled payment is too low to cover interest, the calculator stops. Use reasonable inputs for stable results.

The baseline payment is computed using the standard amortization formula for a fixed-rate loan. Let PV be the loan amount, r the rate per payment period, and n the number of payments:

• r = (annual_rate / 100) / periods_per_year
• Payment = (r × PV) / (1 − (1 + r)⁻ⁿ)
• If r = 0, then Payment = PV / n

Each payment is split into interest and principal. Extra payments and lump sums increase principal reduction, which reduces the balance faster and shortens the payoff term.

1. Enter your loan amount, interest rate, and original term.
2. Select a payment frequency and the first payment date.
3. Add an extra payment, choose how often it applies.
4. Optionally set rounding or a one-time lump sum payment.
5. Click Calculate to view term reduction and savings.
6. Download schedules to CSV or PDF for recordkeeping.

Payment Inputs and Baseline

Enter the principal, rate, term, and frequency to build the baseline schedule. Example: $250,000 at 6.50% for 30 years with monthly payments produces a fixed payment that covers interest first, then principal. The tool converts the annual rate to a per period rate and the term to total payments. Baseline total interest and payoff date become your reference points.

Prepayment Patterns and Timing

Prepayments work best when applied early and consistently. Adding $150 each month on a 30 year loan often reduces the payoff timeline by about 4 to 6 years, depending on the rate and starting balance. If extra is applied every 2 payments, the benefit is smaller because fewer periods receive added principal. Starting extra after payment 13 delays savings. Rounding up, like to the nearest $25, can add steady principal reduction.

Interest Savings Mechanics

Each period interest equals balance multiplied by the per period rate. When extra principal reduces the balance, future interest charges drop, and savings compound across remaining periods. A one time $2,000 lump sum near payment 18 can create visible savings by lowering the balance before many later periods accrue interest. Higher rates magnify savings: the same extra typically saves more at 10% than at 4%.

Interpreting Schedule Outputs

Compare baseline and prepayment schedules by payment count, payoff date, and total interest. Term reduced equals baseline payments minus prepayment payments. Interest saved equals baseline interest minus prepayment interest. Check early rows to confirm extra and lump sums occur at the intended payment numbers. The balance chart should show the prepayment line reaching zero earlier.

Practical Planning Checks

Verify lender rules for applying extra payments and whether prepayment fees exist. Ensure the scheduled payment exceeds the period interest, otherwise amortization cannot progress. Use exports to store scenarios, share with a partner, or compare budget impact. If cash flow varies, test a smaller recurring extra plus an occasional lump sum to create a smoother payoff plan. Review results annually as goals change.

What does “term reduced” represent?

It is the difference between the baseline number of payments and the prepayment number of payments. A positive value means you finish earlier using the selected extra payment settings.

Does biweekly payment always shorten the loan?

Biweekly uses 26 payments per year. If your per payment amount matches the monthly schedule converted to biweekly, term may be similar. If you keep the monthly payment size divided across biweekly periods, you may effectively pay extra each year.

How does rounding up the payment help?

Rounding increases the total payment to a chosen increment, such as the nearest $25. The added amount goes toward principal after interest, which can reduce the balance faster without manually selecting an exact extra amount.

Can I use only a lump sum payment?

Yes. Set the regular extra amount to zero and enter a lump sum with a payment number. The schedule will apply that one time principal reduction at the selected payment.

Why does the extra start payment matter?

Early principal reductions have more time to reduce future interest. Starting extra later can still help, but the payoff date and interest savings usually improve more when extra begins sooner.

What if the calculator says the payment is too low?

If the scheduled payment does not exceed the interest for a period, the balance cannot decline and the loan will not amortize. Increase the payment, lower the rate, or extend the term until the payment covers interest.