Loan Payoff Calculator: Calculation and Examples
Estimate the time and interest needed to repay a balance with a fixed monthly payment.
Understanding the calculation
Each month, interest is added at the entered annual rate divided by 12. The payment covers that interest and reduces principal. The last payment is capped at the amount still owed. New borrowing, fees, and rate changes are excluded.
Loan Payoff formula
Monthly interest = remaining balance × annual rate ÷ 1,200. Remaining balance = previous balance + interest − payment. Repeat until the balance reaches zero.
Worked example
A $5,000 balance at 0% paid at $250 per month takes 20 months to repay. With interest, repayment takes longer and costs more.
Assumptions and interpretation
Repayment estimates use fixed interest and equal monthly periods. No fees, rate changes, new borrowing, missed payments, or penalties are added. Interest accrues on the remaining balance, and the last modeled payment is capped at the amount owed.
Displayed amounts are rounded; intermediate calculations use unrounded values. Compare the result with the terms and payment schedule in your agreement. For background on the calculation, read the CFPB explanation of principal and interest payments.
Frequently asked questions
What happens when the interest rate is zero?
No interest is added. Payments reduce principal directly, so a fixed term divides principal equally and a fixed payment determines how many months repayment takes.
Why might the actual result differ?
Payment timing, daily interest accrual, contract rounding, fees, and changing rates can differ from the monthly estimate. Check the lender or issuer’s agreement for the method used.
What inputs should I enter?
Use amounts and rates from the relevant agreement, with time periods matching the labels. Enter zero for an optional amount that does not apply.