Every personal loan payment is divided between interest and principal according to an amortization formula. Adding extra funds directly to principal accelerates payoff velocity.
1. Extra Principal Amortization Impact
| Payment Plan ($10,000 Loan @ 12% APR for 36 Mo) | Monthly Payment | Total Interest Paid | Time to Debt Freedom |
|---|---|---|---|
| Standard Scheduled Amortization | $332 / Month | $1,957 | 36 Months |
| +$50 Extra Principal Monthly ($382/Mo) | $382 / Month | $1,642 | 30 Months (6 Months Sooner) |
| +$100 Extra Principal Monthly ($432/Mo) | $432 / Month | $1,421 | 26 Months (10 Months Sooner) |