Loan Calculator

How to use the loan calculator

This calculator works for any fixed-rate installment loan — a personal loan, car loan, student loan, home improvement loan or a mortgage. Enter the amount you want to borrow, the annual interest rate and the term in years or months. The monthly payment, total interest, total repayment and payoff date update instantly, and the chart shows your balance falling while the interest you have paid builds up.

Add an amount in the extra payment field to see how overpaying each month shortens the loan and how much interest it saves. Open the schedule to see every payment split into principal and interest; short loans show a monthly schedule and longer loans a yearly summary.

The loan payment formula

Most consumer loans are amortizing: you pay the same amount every month, and each payment first covers the interest that has built up since the last one, with the rest reducing the balance. The fixed payment that brings the balance to exactly zero at the end of the term is:

• M — monthly payment
• P — amount borrowed (principal)
• r — monthly interest rate = annual rate ÷ 12 ÷ 100
• n — total number of monthly payments

If the interest rate is 0%, the formula simplifies to the principal divided by the number of payments. In some countries the same figure is called the EMI (equated monthly instalment).

Worked example

Say you borrow $25,000 at 7.5% for 5 years. The monthly rate is 0.075 ÷ 12 = 0.00625 and there are 60 payments. (1.00625)⁶⁰ ≈ 1.4533, so M = 25,000 × 0.00625 × 1.4533 ÷ 0.4533 ≈ $500.95.

In the first month, interest is 25,000 × 0.00625 = $156.25, so $344.70 of the payment goes to principal. By the final year, interest is only a few dollars a month. Over the full term you pay 60 × $500.95 = $30,056.92, which means $5,056.92 of interest — about 20% of the amount borrowed.

Now add $100 a month extra. The loan is cleared 11 months early and you save just over $1,000 in interest, without changing the rate or refinancing.

What drives the cost of a loan

The interest rate

Your rate depends on your credit history, income, the loan type and whether it is secured against an asset such as a car or home. Secured loans are usually cheaper than unsecured ones. A few percentage points make a large difference: the same $25,000 over 5 years costs about $3,300 in interest at 5%, but over $8,000 at 12%.

The term

Stretching a loan over more years cuts the monthly payment, but you pay interest for longer, so the total cost rises. Compare a few terms side by side before you sign, and choose the shortest one you can comfortably afford.

Fees

Origination or arrangement fees increase the true cost of borrowing even though they do not change the interest rate. That is why lenders in many countries must quote an APR. Use the APR calculator to compare offers with different fees, or the personal loan calculator if your lender deducts a fee from the money you receive.

Amortized loans vs simple-interest loans

With an amortized loan, interest is charged only on the balance still owed, so paying early saves money. Some short-term or informal loans instead charge flat or add-on interest calculated on the original amount for the whole term, which makes the effective rate much higher than the quoted figure. If you are offered a flat rate, our simple interest calculator shows the interest, and you can compare it with an amortized loan here. For a full schedule with yearly and one-time extra payments, use the amortization calculator.

Results are estimates for planning. Your lender's figures may differ slightly because of rounding, payment dates and fees.