Loan Calculator

How It Works

The calculator uses the standard amortization formula to find the single fixed payment that exactly clears your loan by the end of its term, principal and interest included. Each month, interest is charged on the balance you still owe; whatever is left of your payment after covering that interest chips away at the principal. Because the balance is highest at the start, early payments are mostly interest and only a small slice goes to principal. As the balance shrinks, the interest portion falls and the principal portion grows, so the loan pays down faster and faster toward the end — the mechanism behind an amortization schedule. Work through a concrete example. Borrow $25,000 at 8.5% annual interest for 5 years. The monthly rate is 8.5% ÷ 12 = 0.7083%, and the term is 5 × 12 = 60 payments. Plugging those into the formula gives a monthly payment of about $512.90. Over 60 months you pay roughly $30,774 in total, meaning about $5,774 — nearly a quarter of the amount borrowed — goes to interest. In the very first month, interest alone is $25,000 × 0.7083% ≈ $177, so only about $336 of that first $513 reduces your balance. By the final year, almost the entire payment is principal. Use this calculator whenever you want to compare fixed-rate loan offers, size a payment against your budget, or see how much a lower rate or shorter term would save you. Two pitfalls to watch. First, the interest rate is not the whole cost of a loan: origination fees, points, and other charges are captured by the APR, which is usually higher than the quoted rate — always compare loans by APR, not headline rate. Second, this tool assumes a fully amortizing, fixed-rate loan. It does not model variable rates, interest-only periods, balloon payments, or prepayment penalties, so read your loan agreement before assuming the numbers here are the final word.

Monthly Payment = P × [r(1+r)^n] / [(1+r)^n - 1]

Where: P = Loan Amount, r = Monthly Rate, n = Total Payments

Examples

Frequently Asked Questions

Sources

• CFPB — Consumer Financial Protection Bureau: Loans ↗