Loan Overpayment Calculator

It depends on your balance, interest rate, remaining term, and how much extra you pay. As a general pattern, overpaying earlier in a loan saves more than overpaying later, because more of your balance is still outstanding and accruing interest. Enter your own figures in the calculator above for an exact estimate of the interest and time you'd save.

This calculator assumes you keep paying the same monthly amount (plus any extra), so the loan is paid off sooner rather than your required monthly payment going down. Some lenders offer a choice between the two when you overpay: either keep the term the same and reduce future monthly payments, or keep the payments the same and clear the loan early. Clearing it early almost always saves more interest overall, since the balance falls faster.

A lump sum is a one-off extra payment applied straight away, immediately reducing the balance interest is calculated on from that point. A regular overpayment is a smaller extra amount added to every monthly payment from now on. A lump sum of the same total size as a series of regular overpayments generally saves slightly more interest, because it reduces the balance sooner, but regular overpayments are often easier to commit to and adjust.

Possibly, especially on fixed-rate mortgages and some personal loans. Many mortgage lenders let you overpay up to 10% of the outstanding balance each year without an early repayment charge, but anything above that, or clearing the loan entirely during a fixed deal, can trigger a fee. Always check your loan or mortgage terms, or ask your lender directly, before making a large overpayment; this calculator estimates the interest and time saved, but doesn't know about any charges your specific lender might apply.

Yes. Mortgages, personal loans and car finance agreements that charge interest on a reducing balance all work the same way mathematically, so the same calculation applies. Just enter your current outstanding balance, interest rate and remaining term, whichever type of loan it is.

Most UK loans and mortgages charge interest daily or monthly on whatever balance is still outstanding, then add it to what you owe before your next payment is applied. Because your payment covers that interest first and reduces the balance with whatever's left over, paying more than required means less interest builds up the following month, which is why overpaying compounds into a bigger saving than the overpayment amount itself.

It usually comes down to comparing your loan's interest rate with the interest rate you'd earn saving the money instead, after tax. If your loan charges a higher rate than you could realistically earn saving, overpaying is typically the better value option, since the interest saved is guaranteed, while investment returns aren't. It's also worth keeping an emergency fund before prioritising overpayments, since it's usually harder to borrow the money back out of a loan once you've overpaid it.

Most lenders cap penalty-free overpayments at a percentage of your balance each year, commonly around 10% for mortgages, though it varies by lender and product. Personal loans sometimes allow full early settlement at any time, occasionally with a small settlement fee. Check your loan agreement or ask your lender for the exact limit that applies to you.

Overpaying, and paying a loan off early, doesn't harm your credit score, and consistently making at least your required payments on time is generally positive for it. Closing a loan account entirely can occasionally cause a very small, temporary dip for some people, since it changes your mix of active credit, but this is a minor factor compared with maintaining a good payment history.