Loan Payment Calculator
How Loan Payments Are Calculated
Any fixed-rate personal loan uses the amortization formula to determine your monthly payment. The math is straightforward: each payment covers the interest that has accrued on the remaining balance, with the rest reducing the principal. Early payments are interest-heavy; later payments are mostly principal.
The Amortization Formula
M = P × [r(1+r)ⁿ] / [(1+r)ⁿ − 1]
- P = Loan amount (principal)
- r = Monthly interest rate (APR ÷ 12)
- n = Number of monthly payments (years × 12)
A higher rate or longer term both increase total interest paid — but a longer term reduces your monthly payment. This calculator lets you explore those trade-offs instantly.
How to Use This Calculator
- Enter your loan amount (how much you need to borrow)
- Enter the interest rate (APR, not monthly rate)
- Select the loan term in months or years
- Click Calculate to see monthly payment, total interest, and total repayment cost
Example: $25,000 Loan at 8% for 5 Years
Monthly payment: $506.91
Total paid: $30,414.60
Total interest: $5,414.60 — that's 21.7% of the original loan amount paid in interest.
Bumping the rate to 12%: monthly payment rises to $556.11, total interest jumps to $8,366.60. The rate difference alone costs you an extra $2,952.
Tips for Reducing Loan Costs
Making even one extra payment per year toward principal can shave months off the loan and hundreds to thousands in interest. Some lenders allow this with no prepayment penalty — check your loan agreement before making extra payments.