Loan Calculator

Your monthly loan payment is determined using the standard amortization formula, which divides your total debt into equal monthly installments that cover both interest and principal repayment. The formula is: M = P [r(1+r)^n] / [(1+r)^n - 1], where P is the principal (the amount you borrowed), r is your monthly interest rate (your annual rate divided by 12), and n is the total number of monthly payments (your term in months).

What makes this formula elegant is that even though your payment amount stays the same every month, the split between interest and principal shifts over time. In the early months of your loan, the majority of each payment goes toward interest. As you pay down the balance, more of each payment chips away at the principal. This is the core concept behind amortization, and it is why paying off a loan early can save you a significant amount of money.

These two terms are often confused, but they represent different costs. The Interest Rate (also called the nominal rate) is simply the annual cost the lender charges for the loan itself, expressed as a percentage of the outstanding balance. This is the number used in the standard monthly payment formula and is what this calculator uses for its estimates.

The Annual Percentage Rate (APR) is a broader measure of the true cost of borrowing. It includes the interest rate plus any additional mandatory fees, such as origination fees, mortgage points, or broker fees, all rolled into a single yearly percentage. Because APR captures the full picture, it is almost always higher than the stated interest rate. When shopping for a loan, comparing APRs between lenders gives you a more accurate apples-to-apples comparison of what you will actually pay over the life of each loan.

When you make a payment above your required monthly minimum, the extra amount is applied directly to your outstanding principal balance, not to future interest. Because interest is calculated on your remaining principal each month, a lower principal means less interest is charged in every subsequent payment period.

This creates a compounding benefit: each extra dollar you pay today shrinks the balance that interest is calculated on for every remaining month of the loan. The earlier in the loan term you make extra payments, the greater the savings, since you eliminate months of interest compounding. Even a modest extra payment of $50 to $100 per month on a long-term loan like a mortgage can save tens of thousands of dollars and shave years off your payoff timeline. Use the "Extra Monthly Payment" field above to see the exact impact on your specific loan.

An amortization schedule is a complete table that shows the breakdown of every single payment you will make over the life of a loan. For each payment period (typically each month), it lists: the payment number, the total payment amount, the portion going toward interest, the portion going toward principal, and the remaining loan balance after that payment is made.

Reviewing an amortization schedule is one of the most useful things a borrower can do. It reveals how much of your early payments are consumed by interest (which can be a surprise to many first-time borrowers) and shows you concretely how extra payments accelerate your path to being debt-free. Lenders are typically required to provide an amortization schedule upon request, and most mortgage documents include one at closing.

Three main variables determine your total interest cost: your interest rate, your loan term, and your loan amount. A higher interest rate directly increases the cost of borrowing. A longer loan term means more monthly payments, which translates to more months of interest accumulating on the remaining balance. A larger principal gives the lender a bigger base to charge interest on.

Your credit score is the most important factor in determining the interest rate a lender will offer you. Borrowers with excellent credit (typically 750 or above) qualify for the lowest available rates, while those with lower scores may pay several percentage points more, which can translate to thousands of dollars in additional interest over the life of a loan. Additionally, the loan type matters: secured loans (where an asset like a car or home serves as collateral) generally carry lower rates than unsecured personal loans, because the lender's risk is reduced.