Paydown is the process of reducing the amount owed on a mortgage or other loan over time by making partial payments toward the debt. A paydown can refer to any debt, such as a car loan, credit card debt or school loan.

What is a paydown on a loan?

A paydown is a reduction in the principal amount owed on a loan or other debt. … Consumers can achieve a paydown by paying more than the minimum monthly amount due on a debt, such as a mortgage.

How do I calculate which loan to pay off first?

Highest interest rate first Mathematically, you’ll usually pay off your debt more quickly – and with less interest – if you go this route. Also known as the debt avalanche method, you pay off your debt with the highest interest rate first while paying the minimum on your other accounts.