Short answer
On a $300,000, 6.5%, 30-year loan, $200 extra every month saves about $103,449 in interest and ends the loan 6 years 11 months early, while a single $10,000 payment in month 1 saves about $53,602. Earlier and more frequent extra principal saves more.
1. Seven options, one loan
Base case: $300,000 at 6.5%, 30 years, $382,633 total interest.
| Extra payment | Paid off early by | Interest saved |
|---|---|---|
| $100 a month | 4 years 0 months | $60,995 |
| $200 a month | 6 years 11 months | $103,449 |
| $500 a month | 12 years 6 months | $179,759 |
| $2,400 once a year | 6 years 9 months | $99,670 |
| $10,000 once, month 1 | 2 years 9 months | $53,602 |
| $10,000 once, month 60 | 2 years 0 months | $37,356 |
| $25,000 once, month 1 | 6 years 2 months | $116,533 |
2. What the table shows
- The same $10,000 saves about $16,000 more if paid in month 1 than in month 60.
- $2,400 a year ($200 a month in total) saves a little less than paying it monthly, since the money works for you sooner when paid monthly.
- Large early lump sums are powerful but need cash you may prefer to keep.
3. Practical tips
- Mark extra payments as principal only.
- Check for prepayment penalties.
- Keep an emergency fund first.
Try monthly extras in the Amortization Calculator. For a yearly amount, enter one-twelfth. See also how to pay off a loan faster.
4. Frequently asked questions
Is a lump sum or monthly extra payment better?expand_more
Both reduce interest. Earlier and more frequent extra principal saves more. On the example loan, $200 a month saves about $103,449 and a $10,000 lump sum in month 1 saves about $53,602.
When should I make an extra payment?expand_more
As early as you can. A $10,000 payment in month 1 saves about $16,000 more than the same payment in month 60 on the example loan.
Do extra payments lower my monthly payment?expand_more
Usually not. They shorten the loan unless you ask the lender to recast it.
How do I make sure extra payments reduce principal?expand_more
Designate them as principal only with your servicer; otherwise they may be applied to the next scheduled payment.