Loan Calculator
Calculate monthly loan payment and total interest.
About the Loan Calculator
A loan calculator turns three numbers you already know -- how much you are borrowing, the interest rate, and how many years you have -- into the one number that decides whether you can afford it: the monthly payment.
How to use it
- Enter the total amount you are borrowing.
- Enter the annual interest rate (APR), not the monthly rate.
- Enter the term in years. The result updates as you type.
The formula
Every fixed-rate loan is the same calculation. You are solving for the payment that makes a shrinking balance land exactly on zero on the final month.
M = P × r(1 + r)n ÷ [(1 + r)n − 1]
Where P is the amount borrowed, r is the monthly rate (the annual rate divided by 12, then by 100), and n is the number of monthly payments. A 7.5% loan has an r of 0.00625, not 7.5 and not 0.075 — that single conversion is the most common place this goes wrong by a factor of twelve.
Each payment is split. The interest part is simply the balance multiplied by r, so it is largest at the start and shrinks every month; whatever is left over pays down principal. The payment never changes, but what it is buying does.
Worked examples
| Amount | Rate | Term | Monthly payment | Total interest |
|---|---|---|---|---|
| $25,000 | 7.5% | 5 years | $500.95 | $5,057 |
| $25,000 | 7.5% | 7 years | $383.46 | $7,210 |
| $10,000 | 12% | 3 years | $332.14 | $1,957 |
| $35,000 | 6% | 6 years | $580.05 | $6,764 |
Read the first two rows together, because that is the decision most people are actually making. Same loan, same rate, two extra years: the payment falls by $117 a month, which feels like winning, and the total cost rises by $2,153. Stretching a term does not make a loan cheaper. It makes it smaller each month and larger overall, and a lender offering you a longer term is selling you the monthly number.
Common mistakes
- Entering the monthly rate in the annual field. The rate box wants the annual rate your lender quoted. Enter 0.625 instead of 7.5 and the payment comes back implausibly low; enter 7.5 where a monthly rate belongs and it comes back roughly ten times too high. If the answer looks strange, check this first.
- Treating the quoted APR as the interest rate. APR folds origination fees and points into a single annualised number, so it is normally a little higher than the rate the interest is actually charged at. Using APR here slightly overstates the payment. That is the safer direction to be wrong in, but it is still wrong.
- Forgetting fees that come out of the money you receive. A 5% origination fee on a $25,000 loan means $23,750 lands in your account while you repay the full $25,000. Your real cost of borrowing is higher than the rate suggests, and this calculator cannot see that fee unless you add it to the amount.
- Assuming an extra payment goes to principal. Many lenders apply anything extra to next month's instalment instead, which buys you a skipped payment rather than a shorter loan. Paying down the balance early is what saves interest, and on most accounts you have to ask for it explicitly.
Terms explained
- Principal
- The amount you actually borrowed, and the balance that interest is charged on. It falls a little with every payment, slowly at first.
- Interest rate
- The annual percentage charged on the outstanding balance. This is the number the payment formula uses.
- APR
- The rate plus mandatory fees, expressed annually. It exists so two loans with different fee structures can be compared honestly, and it is the number to compare offers on.
- Term
- How long you have to repay, in months or years. The single biggest lever on the monthly payment, and the single biggest lever on total cost, in opposite directions.
- Amortisation
- The process of paying a loan down to zero in equal instalments. Early payments are mostly interest; late payments are mostly principal.
- Total interest
- Everything you pay above what you borrowed. This is the real price of the loan, and the number worth comparing between offers.
Common questions
- Is this the same as APR?
- The rate field takes the annual interest rate. APR also folds in fees, so a quoted APR is usually slightly higher. If APR is all you have, using it gives a marginally conservative payment.
- Why does a longer term cost more overall?
- A longer term lowers the monthly payment but you pay interest for more months. Total interest rises even though each payment is smaller — $25,000 at 7.5% costs $5,057 over five years and $7,210 over seven.
- Does this include tax or insurance?
- No. This is principal and interest only. For a house, property tax and insurance are added on top, and they are not small.
- How much of my first payment is interest?
- Multiply the balance by the monthly rate. On $25,000 at 7.5%, that is $156.25 of the first $500.95 payment — so about 31% of it is interest and the rest reduces the balance.
- Will paying extra each month actually help?
- Substantially, if it is applied to principal. Every dollar taken off the balance stops accruing interest for the entire remaining term, which is why extra payments made early are worth far more than the same amount paid later.
- What happens if I pay the loan off early?
- You stop paying the remaining interest, which is the whole benefit. Check for a prepayment penalty first — they are uncommon on personal loans and not unheard of on mortgages.
- Why is my lender's payment slightly different?
- Rounding and day-count conventions. Some lenders compute interest on actual days elapsed rather than clean twelfths, which moves the payment by a dollar or two. A larger gap than that usually means fees are bundled into the payment.
- Does a bigger deposit or a lower rate help more?
- Early in a term, reducing the amount borrowed usually wins, because it cuts both the balance and the interest charged on it. Run both through the calculator: the comparison takes ten seconds and the answer depends on your numbers.