Loan Calculator
Calculate monthly loan payments, total interest, and the standard amortization formula.
About the Loan Calculator
The loan calculator computes the fixed monthly payment required to fully amortize an installment loan over a chosen term. Enter the principal, the annual interest rate, and the loan term in years, and the tool returns the monthly payment along with total interest paid and total amount repaid. The math is identical whether the loan is a personal loan, auto loan, student loan, or fixed-rate installment credit, because all of them are amortized using the same standard formula.
Amortization literally means "killing off" the debt over time. Each fixed payment covers the interest accrued that month, and the remainder reduces the principal. As the principal shrinks, the interest portion of each payment shrinks too, so an ever-larger share of each subsequent payment goes toward principal. This is why early payments barely move the balance on a 30-year mortgage, while payments in the final years pay it down quickly. The Consumer Financial Protection Bureau (CFPB) calls this the "amortization curve" and requires lenders to disclose it on every closed-end consumer loan per Regulation Z, 12 CFR Part 1026.
This calculator handles fixed-rate, fixed-term loans with monthly compounding. It does not handle adjustable-rate loans, balloon payments, interest-only periods, or loans with irregular payment schedules. For those, you need a loan amortization schedule that allows per-payment overrides, which is beyond the scope of a single fixed formula.
Knowing your monthly payment before you sign matters because lenders often quote "monthly payment only" marketing rather than the APR. A $400 monthly payment sounds affordable until you realize the term is 84 months at 24% APR, meaning you pay roughly $13,400 in interest on a $20,000 loan. The Federal Trade Commission (FTC) warns consumers about this tactic in its "Understanding Vehicle Financing" guide.
How It Works
The monthly payment for a fixed-rate amortizing loan is derived from the present value of an annuity formula:
M = (P x r) / (1 - (1+r)^(-n))
where:
P = loan principal
r = periodic interest rate (annual rate / 12)
n = total number of payments (years x 12)The numerator P x r is the first month's interest on the full principal. The denominator 1 - (1+r)^(-n) is the present value annuity factor that converts a stream of n monthly payments into today's principal equivalent. Dividing the two yields the level payment that exactly pays off both interest and principal over n periods.
Two edge cases are handled explicitly. When the rate is zero (interest-free financing offers common at furniture and electronics retailers), the formula collapses to M = P / n to avoid dividing by zero in the annuity factor. When the principal is zero or the term is zero, the calculator refuses to run and reports an error rather than returning NaN or Infinity.
The total amount repaid is M x n, and total interest is the difference between that and the principal: M x n - P. This is the true cost of borrowing expressed in dollars, which is the figure you should compare against the price of whatever the loan is financing. A 5-year loan at 7.5% APR on $10,000 pays back $12,023, so the borrowing cost is $2,023. A 7-year loan at the same rate on the same principal pays back $12,839, costing $2,839 — extending the term by 40% raises the interest cost by roughly 40%.
Worked Examples
Using the default inputs of $10,000 principal, 7.5% annual rate, and 5-year term: r = 0.075 / 12 = 0.00625, n = 60. The annuity factor 1 - (1.00625)^(-60) evaluates to 1 - 0.6881 = 0.3119. The monthly payment is (10000 x 0.00625) / 0.3119 = $200.38. Over 60 payments, total repaid is $12,022.77, so total interest is $2,022.77.
For an auto loan of $32,000 at 6.2% for 72 months: r = 0.005167, n = 72. The annuity factor is 1 - (1.005167)^(-72) = 0.3100. Monthly payment = (32000 x 0.005167) / 0.3100 = $533.36. Total repaid is $38,401.83, with $6,401.83 paid in interest. That interest is roughly 20% of the vehicle's sticker price, which is why 72-month auto loans are increasingly scrutinized by the CFPB.
Consider the same $32,000 at 6.2% but with a 60-month term: monthly payment rises to $621.63, but total repaid falls to $37,297.80, saving $1,104 in interest. The trade-off is $88 more per month versus $1,104 less in total cost. The tool lets you swap term values instantly to find this break-even.
For a zero-percent promotional loan of $5,000 over 36 months, the calculator switches to the simple division branch: $5,000 / 36 = $138.89 per month, with zero interest. Verify any '0% APR' offer against this calculation — if the dealer's quote is higher, ask why.
When to Use This Tool
Use the loan calculator whenever you need to:
- Compare monthly payments across competing loan offers before signing.
- Decide whether a shorter term with a higher payment beats a longer term with more interest.
- Estimate payments on a personal loan, auto loan, or private student loan.
- Model a "0% financing" retail offer against a cash-price discount.
- Verify that the payment quoted by a dealer or lender matches the contract math.
- Stress-test your monthly budget before applying for credit.
- Compare the cost of financing against paying cash for a major purchase.
Limitations & Disclaimer
This calculator uses standard amortization math and assumes a fixed rate, fixed term, and monthly payments with monthly compounding. It does not model adjustable rates, balloon payments, interest-only periods, prepayment penalties, daily-simple-interest auto loans, or fees that change the APR. For real lending decisions, always review the loan agreement and the Truth in Lending disclosure, and consult a licensed financial advisor. See our disclaimer for full details.
Frequently Asked Questions
Does a lower monthly payment always mean a cheaper loan?
No. A longer term lowers the monthly payment but increases total interest paid, because the principal is borrowed for more months. A $20,000 loan at 8% costs $3,328 in interest over 5 years but $5,416 over 7 years, even though the monthly payment drops from $405.55 to $311.93. Always compare total interest, not just monthly payment.
What is the difference between APR and interest rate?
The interest rate is the cost of borrowing the principal. The APR (annual percentage rate) includes the interest rate plus most loan fees, expressed as a yearly rate. Per the Truth in Lending Act (15 U.S.C. Sec. 1601) and Regulation Z (12 CFR Part 1026), lenders must disclose the APR, not just the interest rate, on consumer credit offers. APR is the figure you should use to compare competing loans.
Can this calculator handle interest-only loans?
No. Interest-only loans do not amortize; the payment covers only accrued interest and the principal is paid as a lump sum at maturity. This tool requires fixed payments that fully amortize the loan over the term, which is the standard structure for auto, personal, and most student loans.
What happens if I make extra payments?
Extra payments reduce the principal faster, which shortens the term and lowers total interest. This calculator does not model extra payments; it returns the contractual payment and total cost assuming only the scheduled payment is made each month. Use a separate amortization-with-prepayment tool to model extra payments.
Why does the first payment barely reduce my balance?
Because interest is charged on the full principal at the start. On a $20,000 loan at 8%, the first month's interest is $133.33, so a $405.55 payment only reduces principal by $272.22. By the final month, interest is under $3, so almost the entire payment goes to principal. This is the amortization curve.
Is the result rounded to the nearest cent?
Yes. Monthly payment is rounded to two decimal places, and total interest and total payable are computed from the rounded payment to match what a lender actually collects. Some lenders round differently or compute interest daily, which can produce a few cents of variance per payment.
Last updated: September 9, 2026 · Author: HT99 Tools Editorial Team