Loan Payment Calculator
Calculate monthly loan payments for any type of loan. See total interest and payoff timeline.
Loan Payment Calculator
How the Calculation Works
Formula: Monthly Payment = [Loan Amount × (Interest Rate / 12) × (1 + Interest Rate / 12)^(Months)] / [(1 + Interest Rate / 12)^(Months) - 1]
This is the standard amortization formula used by banks and lenders. It calculates the fixed monthly payment required to fully pay off a loan over your specified term at your interest rate.
Key Calculation: Your interest rate is divided by 12 for monthly calculations. Each month, interest is calculated on your remaining balance, and the rest of your payment goes toward principal.
Worked Example
Example: You borrow $15,000 at 7% interest for 5 years (60 months).
- Monthly Payment: $291.50
- Total Paid: $17,490 (60 × $291.50)
- Total Interest: $2,490
Compare this to a 3-year loan at the same rate: Monthly payment $461, total interest paid: $1,598 (saves $892 but higher monthly payment). A longer term lowers monthly payments but increases total interest cost.
How to Use This Calculator
Understanding Loan Terms:
- Principal: The original amount you borrowed
- Interest Rate: The annual percentage charged by the lender (APR)
- Term: How long you have to repay the loan (in months)
- Amortization: The process of paying off a loan with fixed payments over time
Tips for Lower Costs: Choose the shortest loan term you can afford (shorter = less interest). If rates are low, consider paying extra toward principal to accelerate payoff. Some lenders offer rate discounts for automatic payments or larger down payments.
Frequently Asked Questions
How much total interest will I pay?
Total interest = (Monthly Payment × Number of Months) - Original Loan Amount. A longer loan term increases total interest significantly. For example, a $15,000 loan at 7% costs $2,490 in interest over 5 years but only $1,123 over 3 years.
Can I pay off a loan early?
Yes. Most lenders allow early payoff without penalties. Paying extra toward principal accelerates your payoff and saves on interest. Always confirm your lender allows prepayment without penalties.
How does interest rate affect my payment?
Interest rate has a major impact. A 1% difference on a $15,000 loan changes the monthly payment by $20-30 depending on term length. Shopping around for better rates can save thousands over the loan's life.
What is APR vs interest rate?
APR (Annual Percentage Rate) includes the interest rate plus fees, while the interest rate is just the cost of borrowing. APR gives you a more complete picture of the total borrowing cost.