You can pay off a loan faster by sending extra money toward the principal, lowering your interest rate, or getting help when the payment no longer fits your budget. Each lever saves a different amount, so it helps to see the numbers first.
How a payment is split
Each payment covers fees first, then interest, and the rest goes to principal, according to the CFPB. Lowering the principal faster lowers the interest you pay and ends the loan sooner.
Here is an example. You borrow $10,000 at 9% APR for 36 months. The payment is about $318 a month, and you pay about $1,448 in interest over the life of the loan. We will use those numbers below.
1. Send extra money to the principal
An extra payment has the biggest effect early in the loan, when most of each payment goes to interest. In the example:
- $50 extra each month pays the loan off in 31 months and cuts interest to about $1,225. You save about $223 and finish five months early.
- $100 extra each month pays it off in 27 months and cuts interest to about $1,063. You save about $385 and finish nine months early.
Before you send more, ask the lender or servicer in writing to apply the extra to principal. The CFPB says to check your statement to confirm how a payment was applied, since a lender may not apply extra money the way you expect. Also check whether the loan has a prepayment penalty, a fee some lenders charge for paying early. Your contract and state law decide whether it applies.
Good sources of extra cash are a tax refund, a bonus, or cancelled subscriptions. Our guide on whether you should pay off a loan early covers when this is the right move.
2. Refinance to a lower rate
Refinancing means a new loan pays off the old one. If your credit has improved or rates have dropped, you may qualify for a lower APR. Refinancing the example loan at 6% for 36 months cuts interest to about $952, a saving of about $496, and the payment falls to about $304. The CFPB notes you may owe a fee if the original loan has a prepayment penalty, so check that first.
New loans can carry fees that cancel the saving. Our loan cost calculator shows the real APR after origination fees, and our post on how origination fees raise your borrowing cost explains why.
3. Consolidate several loans into one
Consolidation combines multiple loans into one payment. It makes bills easier to track, and it saves money only if the new rate is lower than the average of your old ones. A longer term can lower the payment and raise the total interest. Our comparison of consolidation loans and balance transfer cards walks through the math. Federal student loans follow separate rules, so check with your servicer before you consolidate them.
4. Automate payments
A late payment can bring a fee, and one that is 30 days or more late can show up on your credit report. Autopay prevents both. Some lenders also lower your rate a small amount when you enroll, so ask before you sign up. Federal student loan servicers offer an autopay discount too, and it is worth asking yours whether you qualify. Set the withdrawal for a day after your paycheck arrives, and keep a buffer in the account so it does not overdraw.
5. Get help if the payment is too big
If you cannot keep up with the payments, talk to a nonprofit credit counselor before you fall behind. The FTC says a good counselor reviews your whole financial picture and helps you build a workable plan. Some counselors set up a debt management plan, where you make one monthly payment and the counselor pays your creditors. These plans usually cover unsecured debts, such as credit cards, and not homes or cars.
Walk away from any company that charges a fee before it does any work. Our guide to debt relief options compares counseling, settlement, and bankruptcy.
A note on biweekly payment plans
Some lenders and outside companies offer to take half your payment every two weeks. That adds up to 13 full payments a year instead of 12. It only helps if the lender applies each half payment when it arrives. In a suit the CFPB brought against one biweekly program, the CFPB alleged that setup fees of up to $995 would take about nine years to earn back for the median customer.
You can get the same effect without a fee. Divide your payment by 12 and add that amount to every payment. For the example loan, that is about $26.50 extra a month, which ends the loan in 33 months and saves about $128 in interest.
Revised: September 2026
Sources
- CFPB: Is it better to pay off the interest or principal on my auto loan?
- CFPB: Can I prepay my loan at any time without penalty?
- CFPB: CFPB files suit against Nationwide Biweekly
- FTC: How to get out of debt
This article is general education, not financial, legal, or tax advice. Your situation may differ, so check the details with the lender, agency, or a qualified professional before you act. How we research and review articles.
