How early payoff works
Your regular payment stays the same, but every extra dollar goes straight to principal — skipping future interest on that dollar. The earlier you pay extra, the more interest you skip, because interest is calculated on the remaining balance every month.
The math
- Monthly extra $100 on a $200k / 6.5% / 30-year loan: pays it off about 5½ years early and saves roughly $56,000 in interest.
- One-time lump sum has the same effect as making that many regular principal payments — do it early in the loan for maximum impact.
- Watch out: some loans have prepayment penalties; check your contract. Also, if your debt has a higher rate than your investments would earn, paying it down is usually the better "return".
Strategy notes
- Keep an emergency fund before aggressively paying down low-rate debt.
- For mortgages, confirm extra payments go to principal — not just "toward next payment".
- Bi-weekly payments (half payment every 2 weeks) effectively makes 13 payments a year — a classic no-thought trick.