How to use the loan calculator
Type the amount you plan to borrow, the annual interest rate quoted by the lender and how long you will take to repay. The result updates as you type and shows three things lenders don’t always put front and center: the fixed monthly payment, the total interest over the life of the loan and how the balance falls each year.
The calculator assumes a standard fixed-rate, fully amortizing loan with monthly payments — the structure used for most personal loans, student loans, auto loans and mortgages.
The loan payment formula
- M — monthly payment
- P — principal (amount borrowed)
- r — monthly interest rate = annual rate ÷ 12 ÷ 100
- n — total number of payments = years × 12
If the rate is 0%, the formula reduces to M = P ÷ n.
What affects your loan cost
Interest rate
Your rate depends mainly on your credit score, income, existing debt and the type of loan. Secured loans (backed by a car or house) typically have lower rates than unsecured personal loans. Even a one-point difference matters: on a $25,000, 5-year loan, 6.5% instead of 7.5% saves roughly $710.
Loan term
Stretching the same loan over more months reduces the payment but adds interest. Choose the shortest term whose payment fits comfortably in your budget.
Fees
Origination fees are often deducted from the amount you receive. If you need $25,000 in hand and the fee is 3%, you must borrow about $25,773. Include that figure as the loan amount to see the true payment.
Reading the amortization schedule
The schedule under the result groups payments by year. “Principal” is how much of that year’s payments reduced the balance, “Interest” is the lender’s charge, and “Balance” is what you still owe at year end. Early years are interest-heavy; the final years are almost all principal.
Payments for common rates and terms
| APR on $25,000 | Term | Monthly payment | Total interest |
|---|---|---|---|
| 6% | 3 years | $760.55 | $2,380 |
| 6% | 5 years | $483.32 | $3,999 |
| 7.5% | 3 years | $777.66 | $2,996 |
| 7.5% | 5 years | $500.95 | $5,057 |
| 9% | 3 years | $794.99 | $3,620 |
| 9% | 5 years | $518.96 | $6,138 |
| 12% | 3 years | $830.36 | $4,893 |
| 12% | 5 years | $556.11 | $8,367 |
APR vs. interest rate
The interest rate determines your payment. The APR (annual percentage rate) also includes most upfront fees, such as origination fees, spread over the loan’s life, so it is a better way to compare offers. A loan at 7% with a 5% origination fee has a higher APR than a loan at 7.5% with no fee if you keep it for its full term. In the U.S., the Truth in Lending Act requires lenders to disclose the APR before you sign.
Paying a loan off early
On an amortizing loan, each extra payment goes straight to principal, reducing all future interest. Even small additional amounts help: on a $25,000, 5-year loan at 7.5%, adding $50 a month shortens the loan by roughly 6 months and saves several hundred dollars of interest. Check first whether the loan has a prepayment penalty, and ask the lender to apply extra payments to principal rather than to the next month’s payment.
Secured vs. unsecured loans
- Secured loans — mortgages, auto loans, home equity loans — are backed by an asset the lender can take if you don’t pay. Rates are usually lower.
- Unsecured loans — most personal loans, student loans and credit cards — depend on your credit and income, so rates are higher.
Before you borrow
- Check your credit report for errors; your score has a large effect on the rate offered.
- Prequalify with several lenders. Many use a soft credit check that doesn’t affect your score.
- Choose the shortest term you can comfortably afford to minimize interest.
- Compare against alternatives such as a 0% purchase plan, savings or a cheaper secured loan.
- Keep total debt payments manageable: see your ratio with the debt-to-income calculator.