Loan Calculator — Monthly Payments, APR & Amortization

How Loan Calculator Works

M = P × [r(1+r)^n] / [(1+r)^n − 1]

Monthly payment is calculated using the standard loan amortization formula — the same math used for auto loans, personal loans, and mortgages. This formula ensures each payment is exactly the same amount throughout the life of the loan, with the proportion allocated to interest decreasing over time as the principal balance shrinks.

M

Monthly Payment — The fixed amount paid each month toward both principal and interest. This amount stays constant for the entire loan term, but the split between principal and interest changes with each payment.

Principal & Term

Loan Amount & Duration — The principal (P) is the total borrowed; the term (n) is the duration in months. A 5-year $20,000 loan has P=$20,000 and n=60. Together these determine the payment amount and total interest cost.

r

Monthly Rate — The annual interest rate divided by 12. This periodic rate is applied to the outstanding balance each month to calculate the interest portion of the payment.

How to Use

1. Enter the loan amount, annual interest rate (APR), and choose between years or months for the term.
2. Enter the term duration and review your monthly payment, total interest, and total cost.
3. Scroll down to view the full amortization schedule showing each payment split month by month.

Common Uses

• •Compare monthly payments across different loan terms to find the best balance between affordable payments and total interest cost.
• •Calculate the true total cost of a loan including all principal and interest payments over the full amortization period.
• •Experiment with extra payments to see how much interest you can save and how early you can become debt-free.

Understanding the Result

Every loan payment is split between interest and principal repayment. Early in the loan term, most of each payment goes toward interest because the outstanding balance is largest. Over time, as the principal shrinks, less interest accrues and more of each payment goes toward reducing the balance. This is called amortization. The amortization schedule below shows exactly how each payment is allocated month by month and year by year. Use it to understand the true cost of your loan, see how much interest you will pay over the full term, and experiment with extra payments to see how much you could save by paying off the loan early.

Frequently Asked Questions

What is the difference between interest rate and APR?

The interest rate is the base cost of borrowing the principal amount. APR (Annual Percentage Rate) includes fees like origination charges, points, and certain closing costs, so it better represents the true annual cost of the loan. When comparing loan offers from different lenders, always compare APRs rather than just interest rates, as two loans with the same rate but different fees can have meaningfully different total costs.

Should I choose a shorter or longer loan term?

Shorter terms have higher monthly payments but dramatically lower total interest because the principal is paid down faster and less time passes for interest to accrue. Longer terms have lower monthly payments but you pay far more in interest overall. For example, a $20,000 personal loan at 8% for 3 years costs about $2,560 in interest, while the same loan over 5 years costs about $4,300. Choose the shortest term you can comfortably afford.

How does an extra payment affect my loan?

Extra payments go directly to principal reduction, shortening your loan term and reducing total interest. Even $50 extra per month on a 5-year $20,000 loan at 8% can save over $300 in interest and pay the loan off several months early. Use the Extra Payment feature available in the amortization schedule section below to model different scenarios.

What is a typical personal loan interest rate?

Personal loan rates range from 6-36% depending on your credit score, income, and the lender. Borrowers with excellent credit (760+) may qualify for rates as low as 6-12%. Those with average credit typically see rates of 15-25%. Borrowers with challenged credit may face rates above 30%. It is always wise to compare offers from at least three lenders before committing.

What is amortization and why does it matter?

Amortization is the process of spreading out a loan into fixed payments over time. Early payments are mostly interest because the outstanding balance is largest. Over time, as principal shrinks, more of each payment goes toward the balance. A 30-year mortgage at 6.5% means the first year's payments are about 80% interest and 20% principal. Understanding amortization shows why extra payments early in the loan term save the most money.

Sources

• Consumer Financial Protection Bureau
• Investopedia