How to Use a Personal Loan Calculator to Pay Off Debt Faster

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Dori Zinn
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Dori Zinn is a personal finance journalist with more than a decade helping people understand money. Her work has appeared in Wirecutter, CNET, Credit Karma, Huffington Post, and more.
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Updated December 07, 2023
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Katie Miller is a consumer financial services expert. She worked for almost two decades as an executive, leading multi-billion dollar mortgage, credit card, and savings portfolios with operations worldwide and a unique focus on the consumer. Her mortgage expertise was honed post-2008 crisis as she implemented the significant changes resulting from Dodd-Frank required regulations.

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Borrowing money to pay down debt or for emergencies can be a big break for those who need it. But then it comes time to start repaying your personal loan. There are ways you can pay off your loan faster by using a calculator to set or estimate new payments.

Key Takeaways

  • If you have the means to pay off your loan sooner, you may want to, since you’ll save on interest over the total life of your loan.
  • Most lenders don’t have prepayment penalties for paying off a loan sooner than your repayment terms outline. 
  • Shorter repayment terms lower how much total interest you’ll pay, but it also means you’ll have larger monthly payments.

Personal Loan Payoff Calculator

A personal loan amortization calculator is a tool that helps you estimate how much your monthly payments will be based on how much you borrow, your loan terms, and your interest rate (which itself is determined by your lender, based on your credit score and other possible factors).

If you haven’t taken out a personal loan yet, you can use a calculator to input different variables and get a sense of which terms and rates work best for you. Since you’ll need to account for a new loan payment in your budget, it’s a good idea to see how much you can afford before submitting a loan application.

For instance, if you need to borrow $9,000 at a 7% interest rate, your repayment terms will determine your monthly payment. For a three-year term, monthly payments will be $277.89. Meanwhile, for a five-year term, it’ll be $178.21 a month.

Why Pay Off Your Loan Early?

Longer repayment terms means you’ll pay more in interest over the total life of your loan. In the example above, you’ll pay $1,692.65 in interest after paying off your loan in five years. But if you pay it off in three years, you can expect to pay around $1,004.18. That’s a $688 difference if you pay off your loan two years earlier.

Understanding Your Personal Loan

Monthly personal loan payments are broken down by a few different parts, including:

  • Your principal balance, or the amount you originally borrowed.
  • The interest, or what you pay your lender for borrowing money.
  • Fees, if any (like an origination fee, for example).

When you make monthly payments, it’ll include a portion of your principal balance, the interest, and fees, if applicable.

How Do People Use Personal Loans?

Investopedia commissioned a national survey of 962 U.S. adults between Aug. 14, 2023, to Sept. 15, 2023, who had taken out a personal loan to learn how they used their loan proceeds and how they might use future personal loans. Debt consolidation was the most common reason people borrowed money, followed by home improvement and other large expenditures.

Important Terms to Define

Keep tabs on all the moving parts of your personal loan, like:

  • Annual percentage rate (APR): The APR is the actual yearly cost of your loan in interest and fees broken down over a year.
  • Loan terms: The loan terms refer to how long it'll take to repay your loan, usually broken up into months or years. For example, a 5-year loan term can also expressed as 60 months. 
  • Amortization schedule: An amortization schedule is the estimated timeline for paying off your loan in regular installments until the total balance is paid in full. In calculators, you can usually see your amortization schedule broken down per month or per year to see how much you’re expected to pay in interest.

How Can I Pay Off My Personal Loan Faster?

You can pay off your personal loan faster in a few different ways. One would be to make larger monthly payments than the minimum amount you’re required to make. You can increase payments by either a little bit or a lot, depending on what works for your budget. You might be able to set up an autopay amount so you don’t have to manually make larger payments each month.

You can also make extra payments on your principal balance, which would ultimately reduce the amount you'll pay in interest over the life of the loan. Say you got a bonus at work or you recently started a side hustle. You can make one-off payments on your loan throughout the year as long as you continue to make the minimum monthly payment when required. Be sure to notify your lender if you want these extra payments to be made specifically toward the principal, otherwise they may simply be considered a partial payment for the subsequent month.

Is it Good to Close a Personal Loan Early?

Unless your lender charges a prepayment penalty, closing an account early doesn’t ordinarily have a drastic impact on your credit score. Most personal loan lenders don’t have prepayment penalties and usually encourage borrowers to pay off loans early, if possible.

Does it Hurt Your Credit to Close a Loan?

In most cases, any time you close an account, your credit score will go down. For some people, that decrease could be minimal, while others could see a much larger drop.

Closing a personal loan account also impacts the age of your credit history. The longer you have active accounts, the better you look to potential borrowers or credit issuers in the future because it shows them you’re responsible with credit. Overall, it's still generally better to not have the debt, and in most cases, your score will rebound after a few months of regular, on-time payments to other loans or revolving lines of credit, such as a credit card.

The Bottom Line

Taking on more debt through a personal loan can feel like a financial burden. So making a plan to pay off your personal loan faster is one way to be relieved of that feeling sooner. You can use a personal loan calculator to estimate potential monthly payments based on your loan amount, interest rate, and current payment schedule.

If you’re thinking about taking out a personal loan, a calculator will help you determine what your monthly payments could be based on an estimated interest rate and repayment terms. Toggle between different loan terms and interest rates to see what your payments would look like. That way, you'll have a better sense of what you’re comfortable paying and how soon you’d pay off your personal loan.

Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.

  1. Consumer Financial Protection Bureau. "Do Personal Installment Loans Have Fees?"

  2. Consumer Financial Protection Bureau. "What is a Personal Installment Loan?"

  3. Consumer Financial Protection Bureau. "What Is the Difference Between an Interest Rate and the Annual Percentage Rate (APR) in an Auto Loan?"