Why extra payments are so powerful
On a high-interest loan, most of each minimum payment goes to interest, not the balance. Every extra dollar goes 100% to principal - and that dollar stops accruing interest for the entire remaining life of the loan. With the default numbers above ($15,000 at 18% APR, $400/month), adding just $100 a month pays the debt off about a year sooner and saves thousands in interest.
Avalanche vs. snowball
If you have several debts: the avalanche method targets the highest interest rate first and minimizes total interest paid. The snowball method targets the smallest balance first, giving faster wins that help many people stay motivated. Either beats paying only minimums.
Frequently asked questions
Should I pay off debt or invest?
Rule of thumb: pay off any debt charging more than you'd realistically earn investing. Credit card debt at 15%+ is almost always the priority; low-rate mortgages are more debatable.
What if my payment doesn't cover the interest?
The balance grows instead of shrinking and the loan never gets paid off. The calculator warns you if your payment is below the monthly interest charge.
Do extra payments have penalties?
Most consumer loans and all credit cards allow extra principal payments without penalty, but some mortgages and personal loans have prepayment fees - check your loan terms.