Loan Payment Calculator
How This Calculator Works
Monthly Payment (M) = P [ r(1+r)^n ] / [ (1+r)^n - 1 ]
Where:
P = Loan principal (amount borrowed)
r = Monthly interest rate (annual rate / 12)
n = Total number of payments (loan term in months)
Total Interest = (M x n) - P
Total Cost = M x nA loan payment calculator helps you determine exactly how much you will pay each month on any fixed-rate installment loan — whether it is a personal loan, student loan, auto loan, or any other borrowing arrangement with a set interest rate and repayment period. It uses the standard amortization formula that banks and lenders rely on to compute your fixed monthly payment.
Understanding the Amortization Formula
Your monthly payment is determined by three core variables: the loan principal (the amount you borrow), the annual interest rate (converted to a monthly rate by dividing by 12), and the total number of monthly payments (the loan term). The formula calculates a fixed monthly payment that, when applied consistently over the life of the loan, will fully repay both the principal and all accumulated interest by the final payment.
Each monthly payment is split into two parts: an interest charge on the remaining balance and a principal repayment. In the early months of your loan, the majority of your payment goes toward interest because the outstanding balance is still high. As you pay down the principal, the interest portion shrinks and more of each payment reduces the balance. This gradual shift is the essence of amortization.
How Extra Payments Work
One of the most powerful features of this calculator is the ability to model extra monthly payments. When you pay more than the required minimum, the additional amount goes directly toward reducing your principal balance. This creates a compounding benefit: a lower balance means less interest accrues each month, which means an even larger share of your next payment goes toward principal.
Even modest extra payments can have dramatic effects. For example, adding just $100 per month to a $25,000 loan at 6.5% over 60 months can save you over $800 in interest and pay off the loan 8 months early. The savings increase substantially with larger loan amounts and higher interest rates.
Reading the Charts
The pie chart gives you an at-a-glance breakdown of how much of your total cost goes toward the original loan amount versus interest charges. The line chart shows your remaining balance over time, making it easy to visualize how quickly your debt decreases. When you add extra payments, a second line appears showing the accelerated payoff trajectory compared to the standard schedule.
Tips for Borrowers
Always compare loan offers from multiple lenders, as even a small difference in interest rate can translate to significant savings. Pay attention to the Annual Percentage Rate (APR), which includes fees and provides a more accurate picture of total borrowing cost. If your credit score has improved since you originally took out a loan, consider refinancing at a lower rate. And whenever your budget allows, direct extra money toward your highest-interest debt first — a strategy known as the avalanche method.
Frequently Asked Questions
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What You Should Know
A Borrower's Guide to Loan Payments
Taking on debt is one of the most consequential financial decisions you can make. Whether you are financing a major purchase, consolidating existing debt, or covering an unexpected expense, understanding how loan payments work empowers you to borrow wisely and pay off debt efficiently.
The True Cost of Borrowing
Many borrowers focus on the monthly payment amount without considering the total cost of the loan. On a $30,000 personal loan at 8% interest over 5 years, your monthly payment is a manageable $608 — but you will pay $6,497 in total interest, bringing the true cost to $36,497. Over 7 years, the monthly payment drops to $468, but total interest rises to $9,295. The monthly savings of $140 costs you nearly $3,000 more over the life of the loan.
The Power of Extra Payments
Making extra payments is the single most effective strategy for reducing the cost of your loan. Because extra payments go directly to principal, they reduce the balance that accrues interest. On a $25,000 loan at 6.5% over 60 months, adding just $50 per month saves approximately $400 in interest and pays off the loan 5 months early. Double that extra payment to $100 and you save over $800 and finish nearly 9 months ahead of schedule.
Consider directing windfalls — tax refunds, bonuses, or gifts — toward your highest-interest debt. A single $1,000 lump-sum payment early in the loan term can save significantly more than the same payment made years later, because you benefit from reduced interest accrual for a longer period.
Comparing Loan Offers
When shopping for a loan, look beyond the monthly payment. Compare the APR (which includes fees), the total cost of the loan, and any prepayment penalties. Some lenders offer lower rates but charge high origination fees (1-6% of the loan amount), which can negate the rate savings. Use this calculator to model different scenarios: a loan with a 6% rate and 3% origination fee may actually cost more than a loan with a 6.5% rate and no fees.