Not that paying bills is fun, but as we’re running the numbers for our upcoming mortgage, I realized there’s a nifty way to pay off your loan in half the time.  It’s not always possible, but if you have some room in the budget, it may be the motivation you need.

Here’s how it works.

1. Calculate your amortization schedule.  You’ll need the starting balance of the loan, the interest rate, and how many months the loan is set across (if you know your payment amount, you can use that in place of one of the other values).
2. Calculate your amortization schedule.  I’d like to write my own, but here’s a simple app to do the job.  This will give you the break-down of every payment.
3. Figure out what your current balance is on the loan, and find that on the schedule.  By finding this number, you’ll be able to tell how close you are to your pay-off date.
4. Finally, look at the very next month’s payment and write down the amount that is going towards principal.  Add that number to this month’s total payment, and you’ll be essentially paying two months for a little more than the price of one.

Ok, that may seem complicated, so I’ll take an example.  Let’s say I started with a $20,000 student loan at 5%.  The loan is spread across 25 years.  Using the amortizer, I know my monthly payment is $116.91 each month.

If my current loan balance is $19,500, I see that I’m about 14 months into my loan.  I can look at the next month’s principal payment amount, which is $35.60, and add that to my total payment.  So my total payment is $152.51.  If I re-calculate this each month and pay that little extra, I’ll have my loan paid off in half the time.

I realize this might get tighter as you get closer to paying it off, but at that point, you’ll have all the motivation you need to knock out that debt.