Extra Repayments
Save interest with extra payments.
What does Extra Repayments mean?
Making extra repayments on a loan means paying more than the minimum required each month. The additional amount goes directly toward reducing the principal, which means you pay less interest over the life of the loan and pay it off sooner. Even small extra payments can save significant amounts of interest over a long-term loan like a mortgage.
How to calculate Extra Repayments
The calculator first computes the standard monthly payment using the annuity formula, then simulates month-by-month amortization with and without the extra payment. By comparing the two scenarios, it determines how many months are saved and the total interest difference. For example, on a $300,000 loan at 6% over 30 years, an extra $500/month saves roughly 11 years and over $150,000 in interest.
FAQ
It depends on the interest rate. If your loan rate is higher than what you could earn by investing the money (after tax), extra repayments are usually better. They provide a guaranteed, risk-free return equal to your loan interest rate.
Some loans charge early repayment or break fees, especially fixed-rate loans. Check your loan contract or ask your lender before committing to extra payments. Variable-rate loans typically allow unlimited extra repayments.
Both reduce interest, but they work differently. Regular extra payments provide consistent savings and are easier to budget. A lump sum creates an immediate reduction in principal. Ideally, combine both strategies for maximum impact.
Many loan products offer a redraw facility that lets you access extra payments if needed. However, terms vary by lender. Some charge fees or have minimum redraw amounts. Check your loan features before relying on this.
Review whenever your financial situation changes — pay rises, reduced expenses, or receiving a windfall. Even increasing your extra payment by a small amount each year can significantly accelerate your payoff timeline.
Related calculators
- Lump Sum Payment— Impact of a one-off payment.
- Mortgage— Long-term home loan amortization.
- Loan Payment— Monthly payment for borrowed amount.
- Refinance— Compare old vs new loan rate.