How lump sum payments work
A lump sum reduces your balance straight away, so every later payment pays off more capital and less interest. The calculator keeps your normal monthly payment the same and adds your overpayments, so the loan is paid off sooner. It works month by month, charging interest at one twelfth of the annual rate on what you still owe.
You can combine a lump sum with a regular extra payment to see their effect together.
Worked example
On £20,000 at 7% with 5 years left, the normal payment is £396.02 a month. A £3,000 lump sum now saves £1,136.72 in interest and clears the loan 10 months sooner, in 4 years 2 months.
A £5,000 lump sum saves £1,761.56 and 1 year 5 months. A £3,000 lump sum plus £50 a month extra saves £1,478.29 and 1 year 4 months.
Check your agreement
Some loans charge for early repayment, and some lenders lower your payment instead of shortening the term. Ask how a lump sum will be applied before you pay.
Inputs for the loan calculator with lump sum payments
Amount you owe
The balance left on your loan.
Interest rate (per year)
Your current interest rate.
Time left to repay
How many years are left on the loan.
Extra each month
The amount you'll pay on top of your normal payment each month. Enter 0 for none.
One-off lump sum now
A single overpayment made now. Enter 0 for none.
CALCULATOR QUESTIONS
Loan calculator with lump sum payments questions
Does a lump sum payment save interest?
Yes. It cuts the balance that interest is charged on from now on.
How much would £3,000 save?
On £20,000 at 7% with 5 years left, £1,136.72 and 10 months.
Is it better to pay a lump sum or extra each month?
The sooner money goes in, the more interest it saves. Try both in the calculator to compare.
Will my lender charge me for overpaying?
It depends on your agreement. Check for early repayment or settlement charges before you overpay.