Loan Payoff Calculator

How long will it take to pay off my loan?

When you repay a loan, you pay back the principal or capital (the original sum borrowed from the bank) as well as interest (the charges applied by the bank for their profit, which grow over time). Interest growing over time is the really important part: the faster you pay back the principal, the lower the interest amount will be.

Let’s look at an example

Let’s say you’re calculating figures for a boat loan. Your bank has offered you a loan of $40,000 at an interest rate of 4%, paid back over 15 years. Using our calculator tools, we can work out that your monthly payment would be $295.88, meaning that by the date of your last loan payment (in November 2038) you will have paid just over $13,250 in total interest.

Now, consider this: If your bank allows you to make overpayments and you choose to pay an additional $100 a month, you could find yourself paying your loan off a whole five years earlier. As a result, you might only pay $8,856 interest instead of over $13,000. That’s a saving of over $4000!

You can play around with our Loan Payoff Calculator above, or give our loan calculator a try, to see how overpayments can shorten the length of your loan and reduce the amount of interest you’ll end up paying.

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This next section focuses on the example of student loans, but the tips and advice can apply to all types of loans. So read on to learn how to shorten and shrink your loan.

How long will it take me to pay off my student loan?

The value of your student debt depends on a number of factors: where you studied, when you studied, and how long for. Ultimately though, the general rule remains the same: the more you pay towards it, the faster the debt will shrink.

Whether you really need to concern yourself with overpaying to shrink the debt is dependent on where you studied. British students have a more relaxed, means-tested approach, whilst US students face a harsher system and therefore more urgency in paying off their loans.

How long will it take me to pay off my student loan: UK?

In the UK, student loans are repaid as a percentage of earnings, and only when your annual income is over a certain threshold. So when you’re not earning — or not earning much — you don’t need to make any loan repayments.

Of course, interest still accrues over this time, so any ‘downtime’ where you’re not paying off your loan means that there will be more to repay in the long run. However, and this is the critical part, the slate is wiped clean in the end; there will never be a knock at the door demanding a huge, snowballed sum of money if you’ve been making low or no repayments.

Depending on the year in which you took out your loan, it will simply be written off after 25 years, 30 years, or when you turn 65. Phew. For this reason, repaying a student loan in the UK can be considered to work a bit like a ‘graduate tax’, applied in a similar way as income tax or national insurance.

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How long will it take me to pay off my student loan: USA?

In the US, a student loan is treated more like a traditional bank loan. It requires regular repayments, whatever the circumstances. It will not be written off after a certain amount of time, so small repayments can feel stressful for the borrower, who is aware that the interest is constantly growing.

How to pay off a loan faster

The first rule of overpaying is to speak to the lender to ensure that any extra money you send comes off the principal debt, and not the interest. Paying off the principal is key to shortening a loan. Our Loan Payoff Calculator shows you how much you might save if you increased your monthly payments by 20%.

Increase monthly payments to repay your loan faster

  1. If your credit score is good enough, consider refinancing for a lower interest rate. Shifting the debt to a more affordable lender would free up some of that extra interest money to make a dent in the principal instead.
  2. Do you pay off your loan on a monthly basis? Switching to biweekly payments means you would make 13 payments a year instead of 12, getting the principal reduced faster without a huge difference to your monthly budget.
  3. Try downloading a ‘round-up’ savings app such as Acorns, Qoins, Digit or Chime. These apps link to your bank cards, and whenever you make a purchase online or in-store, they round it up to the nearest dollar or pound to siphon the difference into your savings (or in some cases, directly onto loan repayments). So if you spend $3.80 on a coffee, the app calls it $4 and moves $0.20 across to your savings. For each purchase, the difference feels negligible, but it all adds up quickly in your savings. You can use our savings goal calculator to work out how long it might take to reach a target figure.
  4. Are you due a pay rise? Next time your salary increases, try to keep your living costs the same as before and use any monthly surplus to pay off your loan.
  5. Go through your bank statements to see if you’re paying for any subscriptions you don’t actually use. TV channels, magazine subscriptions, domain name renewals, premium delivery services, audiobooks… Anything that you don’t actually use can be cancelled, and you can reallocate that money to pay off the principal of your loan.
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Use a lump sum to pay off your loan faster

Tax refund, bonus, commission, inheritance, yard sale, gift or lottery win? Whatever it may be, an unexpected windfall can be used to pay off a chunk of the principal in one fell swoop.

So there you have it. If you want to see how overpayments can help you save money in the long run, you can use our loan payment calculator, which includes options for both one-off lump sums and regular additional overpayments.

Calculator by Alastair Hazell.