How to use it 01 Enter principal, annual rate, term and payment type. 02 Set the lump sum and the month it is paid after. 03 Switch between shorten term and reduce payment; both results stay on screen. 04 Read interest saved, months saved, the new payment and the break-even rate against investing. Worked readouts 1,000,000 at 4.9% over 30 years, with 200,000 paid after month 24 — the balance at that point is 969,203.95 and the baseline interest is 910,615.12 :
Shorten term: interest saved 416,254.98 , 116 months saved, new term 244 months, payment unchanged at 5,307.27 ; equivalent annual return 4.03% .
Reduce payment: interest saved 167,981.09 , payment falls to 4,212.09 , term stays 360 months; equivalent annual return 2.18% .
Shortening saves 248,273.89 more than reducing. Investing the 200,000 at 3% instead grows to 462,788.02 (gain 262,788.02 ) — 153,466.96 short of the interest saved, so prepaying wins at that rate.
A 2,000,000 lump sum covers the outstanding balance: the loan pays off at month 24 and saves 814,036.69 .
Why the two modes differ Both modes apply the same lump sum to principal at the same month. In shorten-term mode the original payment continues, so every later month carries less interest and the loan retires early; in reduce-payment mode the remaining balance is re-amortised over the original remaining months, so the saving is spread instead of compounded. The equivalent annual return converts the interest saved on the lump sum into a nominal annual rate compounded monthly — the number to place beside an after-tax investment return.
Limits
No fees or penalties. Prepayment charges, rate changes and taxes on investment gains are outside the model.
One lump sum. Multiple or recurring extra payments are not supported; the comparison is a single payment at a single month. What it does not do. It does not recommend prepaying or investing and does not forecast rates; the break-even rate is arithmetic from your inputs, and comparing an investment's own cash flows belongs to NPV / IRR . This page provides general information and scenario estimates based only on the inputs you provide. It is not investment, tax, legal, or other professional advice and does not recommend any rate, product, or institution. The break-even rate is the decision Interest saved is not a return until it is annualised: 416,254.98 saved over the 336 remaining months is an equivalent 4.03% nominal annual rate, so an investment below that loses to prepaying — at 3% the panel shows prepaying ahead by 153,466.96 . The reduce-payment mode is the same lump sum at the same month, yet its equivalent return is only 2.18% , because the payment cut spreads the benefit over the whole term. Compare modes before comparing rates.
Where it is used Checking a windfall against the mortgage Run both modes; when the budget can carry the original payment, shortening usually wins on interest.
Framing the invest-or-prepay question The equivalent annual return is the hurdle: put an expected after-tax return beside 4.03% and read the advantage line.
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References
Wikipedia, Prepayment of loan , en.wikipedia.org （访问日期：2026-10-07）— early repayment and prepayment risk.
Wikipedia, Amortizing loan , en.wikipedia.org （访问日期：2026-10-07）— level-payment schedules and interest.
Wikipedia, Effective interest rate , en.wikipedia.org （访问日期：2026-10-07）— nominal versus effective rate.
OpenStax, Principles of Finance , openstax.org （访问日期：2026-10-07）— loan and interest worked examples.
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Reviewed by CalcX Editorial Team
Updated 2026-10-07