The whole story, as text
What does it cost to pay off a personal loan early?
Paying off early: what has the loan cost by then? $10,000 in hand over 36 months at 14% with no fee, $342 a month. You pay it off at month 12. What has the loan cost you by then?
The answer
$1,220. Run to full term it would cost $2,304. Leaving at month 12 saves the interest not yet charged.
Why
Interest stops when the balance is gone. Fees already paid do not come back. That is why a loan with a fee is the dear one at every early exit, and by a wider margin the sooner you leave. Cost by exit month, 12% + 5% fee against 14% no fee: Month 6: $1,121 against $660. Month 12: $1,623 against $1,220. Month 24: $2,326 against $2,009. Full term: $2,586 against $2,304.
One move
Before you pay off, get the payoff letter. 12% + 5% fee at month 12: $1,623 cost so far, $2,586 at full term. 14%, no fee, at month 12: $1,220 cost so far, $2,304 at full term. The sooner you leave, the wider the gap between the two. Check for a prepayment penalty, and ask for the per-diem interest so the payoff is right on the day the money lands.
The tool shows the cost of leaving at months 6, 12 and 24 for each offer, so you can see the shape before you sign.
Yours
Which offer really costs less? runs these numbers for any loan. Nothing you enter leaves your browser.
The longer read
Paying off early almost always saves money on a simple-interest loan: the interest you have not reached yet is never charged. What it does not do is give back a fee you paid at the start, and on some loans it can trigger a penalty. So the honest question is not “will I save?” but “what has this loan cost me by the month I pay it off?”
The short answer
The cost of a loan at any month is what you have paid so far, plus what it takes to pay it off now, minus the cash you received. On a simple-interest loan with no fee that number is just the interest charged to date. A fee sits in that number from day one, and a prepayment penalty is added on the day you pay off.
A worked example
Two loans for $10,000.00 in hand over 36 months: Offer A at 12% with a 5% fee deducted, Offer B at 14% with no fee.
| Paid off at | Offer A: 12% + 5% fee | Offer B: 14%, no fee |
|---|---|---|
| Month 6 | $1,120.76 | $659.99 |
| Month 12 | $1,622.70 | $1,219.75 |
| Month 24 | $2,326.03 | $2,009.15 |
| Full term, 36 months | $2,586.48 | $2,303.95 |
Two things stand out. Paying off at month 12 instead of running the full term saves Offer B $1,084.20 of interest. And the fee loan is the more expensive one at every early exit, by a wider margin the sooner you leave: at month 6 Offer A has cost nearly twice as much, because the $526.32 fee was charged in full before the first payment.
What to check before paying off
- The payoff amount, not the balance. Interest accrues daily between statements, so the payoff quote is the balance plus interest since the last payment. Ask for a quote good through a date.
- Prepayment penalty. Some loans charge one, often only in the first year or two. It goes on top of the payoff amount.
- Precomputed interest. On a precomputed loan the interest was added at the start, and paying off early earns a rebate of the unearned part, usually less than you would expect. See the question on precomputed-interest loans.
- Where the money comes from. Paying off with money that earns nothing is different from paying off with money you would otherwise keep as a buffer. The tool does not judge that; it shows the loan’s side only.
Questions to ask your lender
- What is my payoff amount today, and through what date is it good?
- Is there a prepayment penalty, and when does it expire?
- Is this loan simple interest or precomputed?
- If I make a partial extra payment, does it reduce the principal or just prepay future instalments?
See it with your own numbers
Which offer really costs less? shows the cost of each offer if paid off at month 6, 12 and 24, alongside the full-term total.
Related: Equal-cash comparison. Glossary: early-exit cost, payoff amount, prepayment penalty.
Educational tool, not advice. Your lender’s payoff quote is the authoritative figure.
Written and reviewed by Riverbend Crossroads Digital LLC, Sunday, September 6, 2026. Figures from the Show Real Cost engine, computed exactly and shown to the cent. Educational, not advice; your lender's disclosures are the authoritative figures. How we calculate · Corrections.