How to use this loan calculator
Enter three numbers and the results update instantly:
- Loan amount: how much you plan to borrow (the principal).
- Interest rate: the annual rate quoted by the lender. If you have the APR, use that, as it includes most fees.
- Loan term: how long you have to repay, in years or months.
You'll see your monthly payment, the total interest over the life of the loan and the total amount you'll repay. The amortization schedule underneath shows how every payment is split between interest and principal, year by year. Open any year to see the individual months.
The page address updates as you type, so you can bookmark a scenario or share it with someone.
How the loan payment formula works
Most personal loans, car loans and mortgages are fixed-rate amortizing loans: you pay the same amount every month, and by the final payment the balance reaches exactly zero. Lenders work out that payment with the standard amortization formula:
When the interest rate is 0%, the formula simplifies to the principal divided by the number of months.
Worked example
Over 60 months you pay about 60 × $396.02 = $23,761, so the loan costs roughly $3,761 in interest.
Now look at the first payment. Interest for month 1 is the balance times the monthly rate: $20,000 × 0.0058333 = $116.67. The rest of the $396.02, which is $279.36, reduces the balance to $19,720.64. In month 2, interest is charged on that slightly smaller balance, so a little more of the payment goes to principal. By the final year almost the whole payment is principal. That shifting split is what the amortization schedule shows.
Why early payments are mostly interest
Because interest is charged on the outstanding balance, it is highest at the start of a loan, when you owe the most. On long loans the effect is large: at typical mortgage rates, most of each payment in the early years of a 30-year loan goes to interest. This is also why paying extra early in a loan saves the most money, as every dollar of principal you clear early stops generating interest for all the remaining months.
Fixed vs variable interest rates
A fixed rate stays the same for the whole term. Your payment never changes, which makes budgeting simple, and this calculator shows exactly what you will pay.
A variable (or adjustable) rate is tied to a benchmark rate and can move up or down during the loan. Variable loans sometimes start lower than fixed ones, but your payment can rise if rates increase. Some loans are a mix: fixed for an initial period, then variable.
If you are considering a variable-rate loan, use this calculator to test a few scenarios: run it at today's rate, then again at one or two percentage points higher. If the higher payment would strain your budget, a fixed rate may be the safer choice.
How to lower the interest you pay
The total interest figure is often the most eye-opening number on this page. These are the main levers you control:
- Choose a shorter term. Try changing the term from 5 years to 4 or 3. The monthly payment goes up, but total interest drops because you borrow the money for less time.
- Improve your credit before applying. Lenders set rates largely on credit history. Paying bills on time, reducing card balances and correcting errors on your credit report can qualify you for a lower rate.
- Shop around. Get quotes from several lenders, including banks, credit unions and online lenders, and compare the APR, not just the headline rate. Many lenders offer a soft-credit pre-qualification that doesn't affect your score.
- Borrow less. A bigger down payment or a smaller purchase reduces the principal, and interest falls with it.
- Make extra principal payments. Even small additional payments shorten the loan and cut interest, as long as your loan has no prepayment penalty.
- Ask about rate discounts. Some lenders reduce the rate slightly if you set up automatic payments from your account.
What this calculator doesn't include
The results cover principal and interest on a standard fixed-rate loan with equal monthly payments. Real loans can differ because of origination or arrangement fees, insurance products, payment holidays, daily rather than monthly interest calculations, or rounding by the lender. Treat the figures as a reliable estimate for comparing options, and always check the final numbers in your loan agreement.