Extra Payment Strategies

Small extra amounts shorten a loan by years. Here are the exact savings, and when paying down debt is not the best use of cash.

Last updated: October 12, 2026. All savings below were computed with this site's amortization code on that date. The FDIC rate page cited was read the same day.

The baseline

The loan is $250,000 at 6.5% over 30 years, a payment of $1,580.17 and $318,861 of interest. An extra payment goes entirely to principal, so it reduces the balance that interest is charged on. Because interest is front-loaded (see the amortization guide), an extra dollar early does the most work.

Fixed extra amounts every month

Extra per month	Paid off after	Total interest	Interest saved
$0	30 years	$318,861	-
$50	27.4 years (329 months)	$285,950	$32,911
$100	25.3 years (304 months)	$260,001	$58,860
$200	22.1 years (265 months)	$221,243	$97,618
$500	16.3 years (195 months)	$155,345	$163,516

Notice the shape. The first $50 a month saves $32,911, but increasing it tenfold to $500 saves about five times as much, not ten. Each extra dollar still helps; there are simply fewer months left for it to work, and the interest charge has already fallen.

One extra payment a year

A common idea is to make 13 payments instead of 12, for example by splitting the payment in half and paying every two weeks, which produces 26 half-payments. The effect equals adding one-twelfth of the payment, about $131.68, to each monthly payment. On this loan that pays it off in 290 months (24.2 years) with $246,148 of interest, saving $72,713. Check with your lender before enrolling in a biweekly program: some charge a fee, and some hold the half-payments until a full payment is due, which removes most of the benefit. Making the extra monthly amount yourself gives the same result without a third party.

Is prepaying the best use of the money?

Paying extra on a 6.5% loan is the same as earning a guaranteed 6.5% return on that money, and no investment can promise that. For comparison, the FDIC's national average rates as of September 21, 2026 were 0.37% on savings accounts and 1.73% on 12-month CDs, so prepaying a loan at this rate looks far better than leaving cash in a typical savings account. That changes in three situations:

No emergency fund. Money sent to a loan is hard to get back. Build a cash cushion first; the emergency fund guide shows how to size it.
Higher-rate debt exists. A card at a much higher rate should be paid before a lower-rate loan.
A low-rate loan. At a very low rate, the guaranteed return from prepaying is small and other uses may win. Compare with the savings calculator.

Practical steps

Confirm there is no prepayment penalty in your loan documents before you start.
Tell the servicer that extra money is to be applied to principal, not to future payments.
Automate the extra amount so it happens before other spending does.
Revisit the amount when income rises; try a few values in the calculator.

Methodology and sources

The schedule is built month by month: interest is the opening balance times the monthly rate, the scheduled payment plus the extra amount is applied, and the balance falls by payment minus interest. The one-extra-payment case adds the scheduled payment divided by 12 to every month, which approximates 13 payments a year.

Sources: FDIC, National Rates and Rate Caps (September 21, 2026 figures).

Limitations and assumptions

These results assume a fixed rate, no fees, no prepayment penalty, and that extra money is applied to principal as soon as it is paid. Lenders may apply payments differently. Tax effects such as mortgage interest deductions are not modelled.

Try your own amounts in the loan calculator. These guides are for education and are not financial, tax, legal or insurance advice. Nothing you type into the calculators is sent anywhere.