Loan calculator: understand your monthly payment and what a loan really costs
Before you sign for a personal loan, a car loan or a loan to consolidate debt, the monthly payment is usually the first number you see. It matters, but it isn’t the whole story: a lower payment often means paying interest for longer. Seeing the payment, the total interest and how the balance falls over time can help you compare offers and choose terms you’re comfortable with.
Loan calculator
- Monthly payment
- –
- Total interest
- –
- Total of all payments
- –
- With your extra payment
- –
Amortization schedule, by year
| Year | Principal paid | Interest paid | Balance at year end |
|---|
Uses a fixed rate, fixed monthly payments and monthly interest at one-twelfth of the annual rate. Fees, taxes and insurance are not included; your lender’s APR also reflects certain fees. Everything here runs in your browser; nothing you enter is stored or sent.
What this calculator can help you understand
- Your monthly payment for a fixed-rate loan with a set term.
- How much interest you’d pay over the life of the loan, and the total of all payments.
- How the balance falls over time, in a chart and a year-by-year amortization schedule.
- What extra monthly payments could save in time and interest.
When it’s useful
- Before taking out a loan, to see whether the payment fits your budget.
- When comparing offers, such as different rates or terms from several lenders.
- When deciding on a term, to weigh a lower payment against higher total interest.
- When you have an existing loan, to see what paying a little extra would do.
Who it’s for
- Borrowers considering a personal loan, including a debt consolidation loan.
- Car buyers comparing financing offers.
- Anyone with a fixed-rate installment loan who wants to understand the schedule.
What to enter
| Input | What it means | Where to find it |
|---|---|---|
| Loan amount | The amount borrowed, including any fees added to the loan | Your loan offer |
| Annual interest rate | The yearly rate charged on the balance | Your loan offer or agreement |
| Loan term | How long you have to repay, in years | Your loan offer |
| Extra monthly payment | An optional amount added to principal each month | Your budget |
How to use it
- Enter the loan amount.
- Enter the annual interest rate from the offer.
- Enter the term in years. Use halves for terms like 30 months (2.5 years).
- Read the monthly payment first, then the total interest.
- Open the amortization schedule to see how principal and interest change each year.
- Add an extra monthly payment to see how much sooner you’d finish and how much interest you’d save.
Understanding your results
- Monthly payment is the fixed payment that repays the loan over the term: payment = amount × r ÷ (1 − (1 + r)⁻ⁿ), where r is the monthly rate (annual rate ÷ 12) and n the number of months.
- Total interest is everything you’d pay beyond the amount borrowed.
- Total of all payments is the amount borrowed plus total interest.
- With your extra payment shows the new payoff time and interest saved, assuming extra payments go to principal.
- The amortization schedule shows principal and interest paid each year and the balance left.
What it doesn’t include: fees, insurance, taxes, or variable rates.
A worked example
Suppose you’re offered a $20,000 loan at 8% for five years (a hypothetical offer).
- Inputs: amount $20,000; rate 8%; term 5 years; no extra payment.
- Method: monthly rate r = 0.08 ÷ 12; n = 60; payment = $20,000 × r ÷ (1 − (1 + r)⁻⁶⁰).
- Result: a monthly payment of $405.53. Over five years you’d pay $4,332 in interest, $24,332 in total.
- The first payment: $133.33 is interest ($20,000 × 0.08 ÷ 12) and $272.19 reduces the balance. In the first year, you’d pay $1,478 in interest and $3,389 in principal.
- With $50 extra a month: the loan would be repaid in 4 years, 5 months, saving about $590 in interest.
How the result changes
$20,000 at 8%, with different terms:
| Term | Monthly payment | Total interest |
|---|---|---|
| 3 years | $626.73 | $2,562 |
| 5 years | $405.53 | $4,332 |
| 7 years | $311.72 | $6,185 |
$20,000 for five years, with different rates:
| Interest rate | Monthly payment | Total interest |
|---|---|---|
| 6% | $386.66 | $3,199 |
| 8% | $405.53 | $4,332 |
| 10% | $424.94 | $5,496 |
Stretching the term from three to seven years lowers the payment by about half but more than doubles the interest. A two-point difference in rate changes the total interest by more than $1,000 on this loan.
Common mistakes
- Comparing payments instead of total cost. A lower payment over a longer term can cost more.
- Mixing up the rate and the APR. Use the interest rate for the payment; use the APR to compare offers, since it includes certain fees.
- Forgetting fees added to the loan. If an origination fee is financed, include it in the amount.
- Assuming extra payments go to principal automatically. Check how your lender applies them and whether there’s a prepayment penalty.
What to do with your result
- Compare offers using both the APR and the total interest, not only the monthly payment.
- Choose a payment that leaves room in your budget for savings and surprises.
- If you’re consolidating debt, compare this loan’s total interest with your current plan using the debt payoff calculator.
- Ask the lender about fees, prepayment terms and how extra payments are applied before you sign.
Limitations to keep in mind
The calculator assumes a fixed interest rate, equal monthly payments and interest at one-twelfth of the annual rate, and it leaves out fees, insurance and taxes. Lenders may calculate interest daily or round payments differently, so actual figures may vary slightly. The results are estimates, not a loan offer, approval or financial advice.
Frequently asked questions
What’s the difference between the interest rate and the APR?
The interest rate is what the lender charges on the balance. The APR (annual percentage rate) also includes certain fees and charges, expressed as a yearly rate, so it reflects the cost of borrowing more fully. Under the federal Truth in Lending Act, lenders must disclose the APR, which makes it useful for comparing offers. This calculator uses the interest rate to compute your payment.
Why is so much of my early payment interest?
Interest is charged on the remaining balance, which is highest at the start. In our example, $133.33 of the first $405.53 payment is interest; by the last payment, interest is only $2.69.
Do extra payments really help?
Yes, if your lender applies them to principal and doesn’t charge a prepayment penalty. In our example, an extra $50 a month repays the loan in 4 years, 5 months instead of five years and saves about $590 in interest.
Should I choose a shorter or longer term?
A shorter term means higher payments but less total interest; a longer term lowers the payment but costs more overall. The right choice is a payment you can comfortably afford without stretching your budget.
Can I use this for a mortgage?
It calculates principal and interest on any fixed-rate loan, including a mortgage, but a mortgage payment usually also includes property taxes, homeowners insurance and sometimes mortgage insurance, which aren’t included here.
Does the result include fees?
No. Origination fees, late fees and insurance aren’t included. If a fee is added to the loan amount, include it in the amount you enter.
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This calculator gives estimates for illustration, based on the figures you enter and the assumptions described on this page. It isn’t financial, tax or legal advice, an offer, or a guarantee of any outcome.