RightFiguresOne debt, two schedules
Each month credits interest on the current balance at one-twelfth of the annual rate you enter. Interest rounds half up to the nearest cent. The regular payment is then applied. Any extra payment is applied after that interest, and only up to the principal still outstanding. The balance is never paid below zero, so a large extra payment is capped on the month it would finish the debt.
The final payment can be smaller than the regular payment. It is never larger than the regular payment plus the extra amount that still fits. Both the regular schedule and the accelerated schedule must end at zero. An extra payment of $0.00 makes the two schedules match.
What gets rejected
The annual rate may be from 0% through 100%. A rate of 100% is a boundary the calculator accepts when the payment can still pay the debt off. It is not a typical consumer rate.
The regular payment must be greater than the first month’s interest. A payment equal to that interest is rejected. Extra money cannot make that schedule valid, because the limit is checked on the regular payment alone.
The regular schedule must finish within 600 monthly payments, the same horizon used for the extra-mortgage ledger. If it would still have a balance after 600 payments, the result is rejected even when an extra payment would finish sooner.
Worked example
A $1,000.00 balance at 12% with a $100.00 monthly payment takes 11 months. Total interest is $58.98, and the last payment is $58.98.
The same balance with a $25.00 extra payment takes 9 months. Total interest is $47.62, and the last payment is $47.62 because the remaining balance is smaller than the regular payment, so the extra payment is capped at $0.00 on that last month. Interest saved is $11.36. Months saved are 2.
At 0% interest, a $1,000.00 balance and an $83.33 payment take 13 payments and $0.00 of interest. The last payment is $0.04. Adding a $10.00 extra payment finishes in 11 payments, still with $0.00 of interest, and the last payment is $66.70.
What this does not model
This is not a credit-card minimum-payment formula, a promotional rate, or a variable APR. It does not allocate a payment across several balances the way Regulation Z discusses for open-end credit. New purchases, fees and a changing rate are excluded. Paying more than a required installment reduces interest only for the fixed balance and rate you enter. The Consumer Financial Protection Bureau explains a similar idea for the three-year payoff box on a credit card statement: the issuer’s figure assumes no new charges and the issuer’s own method.
A generic installment with a chosen term belongs on the loan payment calculator. A mortgage balance with extra principal belongs on the extra mortgage payment calculator. A car purchase with tax and fees belongs on the car loan calculator.
Sources & review
- A box on my credit card bill says that I will pay off the balance in three years if I pay a certain amount. What does that mean? — Consumer Financial Protection Bureau
- What is a personal installment loan? — Consumer Financial Protection Bureau
Last reviewed: . The formula is reproduced above so you can check the math independently.
Educational estimate only. A creditor’s payoff, a variable rate and a credit-card minimum can differ from this fixed schedule.