Loan Payoff Calculator: What an Extra Payment Buys Back

What the calculator is doing

A loan balance does not fall by the size of your payment. Each period the lender takes the interest owed off the top, and only the remainder reduces what you owe. The calculator repeats that cycle: interest is charged on the current balance, the payment is subtracted, and the leftover becomes the new balance. It keeps looping until the balance reaches zero.

An extra amount changes the loop. Because the extra money goes to principal, the following period's interest is charged on a smaller number, so the loop ends sooner. The output is two differences: the number of months between the payoff date with your current payment and the payoff date with the extra added, and the total interest charged in each case with the gap between them. Nothing else is calculated.

What each input means

1. Balance outstanding. The principal you owe today, taken from your most recent statement or from a payoff figure the lender gives you. Do not enter the original amount borrowed.
2. Annual interest rate (%). The annual rate written into your loan agreement, as a percentage. Whether a rate is high or low depends on the agreement, the security, and your circumstances, and the calculator does not judge that. Under section 347 of the Criminal Code, the criminal rate of interest is 35% per year; that is a legal ceiling, not a benchmark.
3. Monthly payment you make. The amount that actually leaves your account each month, including the portion that covers interest. If the payment moves with a variable rate, use the current figure and treat the result as a snapshot.
4. Extra each month. The additional amount you would put toward the loan every month. Enter zero to see the baseline.

What the result assumes

The arithmetic rests on assumptions you should read before relying on the numbers.

• The annual rate you enter stays the same for the whole projection.
• Interest is applied on the same schedule as your payments, so the annual rate is spread across your payment periods rather than compounded the way the lender may compound it.
• Every payment is made on time and in full, and no new charges, insurance or penalties are added to the balance.
• The extra amount goes entirely to principal, and the lender allows extra payments without a prepayment charge or a prepayment limit.
• You make no new draws on the loan, which matters if the balance is a line of credit rather than a closed loan.

These are the places a real loan diverges. Canadian fixed-rate mortgages are compounded semi-annually by law, so a mortgage payoff will not match a projection that spreads interest across payment periods to the dollar; the Financial Consumer Agency of Canada outlines how mortgage payments and prepayment are handled. Prepayment privileges and the order in which a payment is applied come from your contract, and lending is licensed provincially, so the rules differ by province and territory — the FCAC maintains a list of provincial and territorial regulators.

What the output is not

The output is an estimate of time and interest and nothing more. It is not an offer, a quote, a rate hold or an approval, and a screen showing a shorter payoff says nothing about your credit. loanmoose.ca is not a lender and does not make credit decisions. Whether money is lent, at what rate, and whether extra payments are allowed without cost belong to the lender you deal with, under the agreement you signed and the licensing rules that apply where you live.

Before acting on a projection, ask the lender two things in writing: what happens to the interest if you pay extra, and whether a prepayment charge applies. The Financial Consumer Agency of Canada publishes plain-language material on debt and borrowing that covers how payments are applied and what to check in an agreement.