Loan Calculator
Calculate loan payments and total cost of borrowing.
Monthly payment
$495.03
- Total interest$4,701.80
- Total paid$29,701.80
This loan calculator turns an amount, an annual rate, and a term into a fixed monthly payment and the total cost of borrowing. It covers any fully amortizing installment loan — personal, student, medical, a furniture purchase — where the balance reaches zero at the end of the term.
The payment is the number most people want, but the total interest is the number that decides whether the loan is a good idea. On a $25,000 five-year loan at 7%, you pay back about $4,700 in interest — roughly a fifth of the amount borrowed. Below: the formula, a term-length comparison, and what a payment quote usually leaves out.
How to calculate a loan payment
- Convert the annual rate to a monthly rate: 7% / 12 / 100 = 0.005833.
- Convert the term to months: 5 years × 12 = 60.
- Apply M = P × r(1+r)^n / ((1+r)^n − 1): 25,000 × 0.005833 × 1.4176 / 0.4176 = $495.
- Multiply the payment by the number of months for the total repaid: 495 × 60 = $29,700.
- Subtract the principal: 29,700 − 25,000 = $4,700 of interest.
Example
Borrow $25,000 at 7% over five years: the payment is $495.03, total repaid is $29,701.80, and interest is $4,701.80. Stretch the same loan to seven years and the payment drops to $377 — but total interest rises to $6,702, about $2,000 more for the same money.
Loan payment formula
M = P × r(1+r)^n / ((1+r)^n − 1), with r = APR / 12 / 100 and n = years × 12. Total interest = M × n − P.
How to use this calculator
- Enter the amount actually borrowed, not the purchase price — any down payment is already excluded.
- Type the annual percentage rate. If the lender quotes a monthly rate, multiply it by 12 first.
- Set the term in years. Six months is 0.5; the field accepts decimals.
- Read the monthly payment first, then the total interest underneath. Change the term to see how much the extra time costs.
What the payment includes
Only principal and interest. Origination fees, late charges, insurance products sold with the loan, and any payment protection plan sit outside the number. If a lender quotes a payment that includes those, the rate is effectively higher than the one you typed here.
Term length: cash flow vs. total cost
A longer term lowers the monthly payment and raises the total interest, every time. The table below is the same $25,000 at 7% across three terms.
| Term | Monthly payment | Total interest |
|---|---|---|
| 3 years | $770 | $2,724 |
| 5 years | $495 | $4,702 |
| 7 years | $377 | $6,702 |
Doubling the term roughly doubles the interest, while the payment falls by less than half.
Fixed vs. variable rate
A fixed rate keeps the payment constant; the risk is that rates fall and you are locked in. A variable rate follows a benchmark, so the payment moves — usually up. For a loan under five years the difference is small; for a decade-long loan it can be the largest single variable in the cost.
What this calculator leaves out
Fees financed into the loan, payment holidays, balloon structures, and any rate change after closing. It also assumes you never pay late: a single missed payment can trigger a default rate well above the quoted APR.
Common mistakes
- Entering the purchase price instead of the amount financed. A $30,000 car with $5,000 down is a $25,000 loan.
- Comparing payments without comparing total interest. The longer loan always looks cheaper per month.
- Assuming the quoted APR includes fees. It may not — check the finance charge disclosure.
FAQ
How is a monthly loan payment calculated?
M = P × r(1+r)^n / ((1+r)^n − 1), where P is the amount borrowed, r the monthly rate, and n the number of payments. It assumes equal payments and no fees.
What is the difference between interest rate and APR?
The interest rate prices the money; APR folds in fees and is therefore higher. On a $20,000 loan with $400 of fees, an 8.5% rate can produce an APR near 9.4%.
Does paying extra reduce the payment or the term?
The term, on a fixed-payment loan. The scheduled payment stays the same and the balance falls faster, so you finish earlier and pay less interest overall.
How much can I borrow?
Lenders work backwards from a payment they think you can carry, usually capped by a debt-to-income ratio. At 36% DTI on $6,000 gross income, total debt payments of $2,160 are the ceiling.
Why is total interest so high on a long loan?
Interest is charged on the outstanding balance every month, and a longer term keeps a large balance alive for longer. On $25,000 at 7%, five years costs $4,700 in interest and seven years $6,700.
Is a personal loan better than a credit card?
Usually, if the rate is below the card's. A 7% personal loan costs roughly a fifth of a 22% revolving balance per year, and the fixed term forces repayment instead of allowing it to drift.
Can the payment change during the loan?
Only if the rate is variable, the loan is re-amortized, or you miss a payment and a default rate applies. A fixed-rate, fixed-term loan has a payment that never changes.