How a fixed-rate loan works
Each monthly payment covers the interest for that month first, and whatever is left chips away at the principal. Early on most of the payment is interest; as the balance falls, more goes to principal. The calculator uses the standard amortization formula to find the level payment that clears the loan exactly at the end of the term.
Why an extra payment saves so much
Every extra dollar goes straight to principal, so it stops accruing interest for the entire remaining life of the loan. On a multi-year loan, even a small extra payment each month can shave months off the term and save hundreds in interest โ the calculator shows both figures.
APR vs interest rate
This tool uses the interest rate. A loanโs APR can be higher because it folds in fees like origination charges. If your loan has an origination fee, your true cost is a little above what the payment alone suggests โ compare loans by APR, not headline rate.