Loan Calculator
Use this free Loan Calculator to estimate your monthly loan payment, total interest, total repayment and amortization schedule. Enter the amount you want to borrow, annual interest rate and loan term to see how much you may pay each month.
Calculate Monthly Loan Payment
Loan Calculator With Extra Monthly Payment
See how an additional monthly payment may affect your total interest and estimated payoff period.
What Is a Loan Calculator?
A loan calculator is an online financial tool that estimates the payment required to repay a loan over a specified period. The calculation normally uses the principal amount, interest rate and repayment term.
For a standard fixed-rate amortizing loan, each scheduled payment contains an interest portion and a principal portion. At the beginning of the loan, the outstanding balance is higher, so the interest portion is generally larger. As the principal balance decreases, more of each payment goes toward principal.
Loan Payment Formula
The standard fixed-rate monthly payment formula is:
M = monthly payment
P = principal or original loan amount
r = monthly interest rate
n = total number of monthly payments
To convert an annual interest rate into a monthly rate, divide the annual rate by 12 and convert the percentage to a decimal.
The total number of monthly payments is calculated as:
Loan Calculator Example
Suppose you borrow $25,000 at an annual interest rate of 6.5% for 5 years.
| Loan Detail | Example |
|---|---|
| Loan Amount | $25,000 |
| Annual Interest Rate | 6.5% |
| Loan Term | 5 years |
| Number of Payments | 60 |
The calculator uses these values to estimate the required monthly principal-and-interest payment and the total interest over the scheduled repayment period.
Principal vs. Interest
Principal is the amount borrowed from the lender. Interest is the cost charged for borrowing that money. Each payment on a typical amortizing loan is divided between these two components.
| Term | Typical Effect |
|---|---|
| Shorter loan term | Higher monthly payment, generally less total interest |
| Longer loan term | Lower monthly payment, generally more total interest |
| Higher interest rate | Higher payment and generally higher total interest |
| Lower interest rate | Lower payment and generally lower total interest |
A longer repayment period can make the required monthly payment smaller, but it may increase the amount of interest paid over the life of the loan.
Loan Amortization
Amortization is the process of gradually paying down a loan through scheduled payments. With a standard amortizing loan, the outstanding principal balance decreases over time and the interest portion of the payment generally decreases as well.
An amortization schedule shows how each payment is divided between interest and principal and how the remaining balance changes.
How to Calculate Loan Interest
For a standard fixed-rate amortizing loan, total interest can be estimated by subtracting the original principal from the total of all scheduled payments:
This calculation assumes that the payment schedule contains only principal and interest and does not include separate fees, taxes, insurance or other charges.
Loan Calculator for Personal Loans
A personal loan calculator can help estimate monthly payments before comparing lenders. Enter the expected borrowing amount, interest rate and repayment period to understand the approximate cost of the loan.
Auto Loan and Car Loan Calculator
For an auto or car loan, the calculator can estimate the principal and interest portion of the scheduled payment. Actual vehicle financing can also include fees, taxes, down payments, trade-in values and other charges that are not included in this basic calculation.
Mortgage Loan Calculator
A basic loan calculator can estimate mortgage principal and interest, but a real mortgage payment may include additional costs such as property taxes, homeowners insurance, mortgage insurance and other housing-related expenses. Therefore, the principal-and-interest result should not automatically be treated as the complete monthly housing payment.
What Is APR?
APR, or Annual Percentage Rate, is a broader measure of borrowing cost than the stated interest rate. Depending on the loan and jurisdiction, APR can incorporate certain fees and other costs. Therefore, an interest rate and APR should not automatically be treated as identical figures.
Extra Loan Payments
Making additional payments toward principal may reduce the outstanding balance faster. A lower balance can reduce future interest on loans where interest is calculated from the remaining principal balance.
The amount of interest saved depends on the loan terms, payment timing, lender rules and whether any prepayment restrictions or fees apply. Always check your loan agreement before making additional payments.
Common Loan Types
- Personal loans
- Auto loans
- Car loans
- Home loans
- Mortgage loans
- Student loans
- Business loans
- Equipment financing
- Installment loans
- Fixed-rate loans
Loan Calculator Uses
- Estimate monthly loan payments
- Compare different loan terms
- Compare interest rates
- Estimate total interest
- Estimate total repayment
- Understand principal and interest
- Evaluate extra monthly payments
- Compare shorter and longer repayment periods
- Plan personal loan payments
- Estimate auto or car loan payments
- Estimate basic mortgage principal and interest
Loan Calculation Tips
- Compare the interest rate and APR when reviewing loan offers.
- Check the total interest, not only the monthly payment.
- Consider whether a longer term increases the overall borrowing cost.
- Review origination fees and other lender charges.
- Check whether the lender allows additional principal payments without penalties.
- For mortgages, include taxes, insurance and other applicable housing costs when estimating the complete payment.
Loan Calculator Accuracy
This calculator provides an estimate for a standard fixed-rate amortizing loan. Actual loan calculations can vary based on the lender's payment schedule, interest calculation method, fees, rounding, payment dates, insurance, taxes, prepayment rules and other contractual terms.
For important financial decisions, compare the calculator result with the payment schedule and disclosures supplied by your lender.
Frequently Asked Questions
How is a monthly loan payment calculated?
A standard fixed-rate amortizing loan payment is calculated from the principal, monthly interest rate and total number of monthly payments.
What is the loan payment formula?
The standard formula is M = P × [r(1+r)n] ÷ [(1+r)n − 1], where M is the monthly payment, P is principal, r is the monthly interest rate and n is the number of payments.
What is principal on a loan?
Principal is the original amount borrowed. Principal payments reduce the outstanding loan balance.
What is loan amortization?
Loan amortization is the process of gradually paying off a loan through scheduled payments allocated between principal and interest.
Does a longer loan term reduce the monthly payment?
Generally, yes. However, extending the loan term can increase the total interest paid over the life of the loan.
What is the difference between interest rate and APR?
The interest rate is the rate charged on the loan balance. APR is a broader measure of borrowing cost that can include certain fees.
Can extra loan payments reduce total interest?
Often, reducing the principal earlier can reduce future interest, but the actual result depends on the loan agreement and lender rules.
What types of loans can this calculator estimate?
It can estimate standard fixed-rate amortizing payments commonly used for personal loans, auto loans, car loans and other installment loans.
How much interest will I pay on a loan?
For a standard loan without additional fees, estimated total interest equals total scheduled payments minus the original principal.
Is this loan calculator an official lender quote?
No. It is an estimate based on the information entered. Actual lender calculations may differ because of fees, timing, rounding, taxes, insurance and other loan terms.
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