Loan Payment Calculator
Calculates your fixed monthly payment on an amortizing loan. Use it when shopping for a mortgage, auto loan, or personal loan to compare total costs across different rates and terms.
About this calculator
This calculator uses the standard amortizing loan formula to find the fixed monthly payment (M) that fully repays principal and interest over the loan term. The formula is: M = P × [r(1+r)^n] / [(1+r)^n − 1], where P is the loan principal, r is the monthly interest rate (annual rate ÷ 12 ÷ 100), and n is the total number of monthly payments (years × 12). Each payment covers the interest accrued that month plus a portion of the principal. Early payments are mostly interest; later payments are mostly principal — a pattern called amortization. The total amount paid equals M × n, and total interest paid equals (M × n) − P. Understanding this formula helps you see why even a small reduction in the interest rate can save thousands of dollars over the life of a loan.
How to use
Suppose you borrow $20,000 at a 6% annual interest rate for 4 years. First, compute the monthly rate: r = 6/100/12 = 0.005. Next, compute n = 4 × 12 = 48 payments. Now apply the formula: M = 20,000 × [0.005 × (1.005)^48] / [(1.005)^48 − 1]. Calculate (1.005)^48 ≈ 1.2705. Numerator: 20,000 × (0.005 × 1.2705) = 20,000 × 0.006353 = 127.06. Denominator: 1.2705 − 1 = 0.2705. Monthly payment M = 127.06 / 0.2705 ≈ $469.70. Total paid = 48 × $469.70 = $22,545.60; total interest = $2,545.60.
Frequently asked questions
How does the loan interest rate affect my monthly payment?
The interest rate directly raises or lowers the monthly payment because it determines how much interest accrues each month on the outstanding balance. A higher rate means more interest per period, so a larger portion of each payment goes to interest and less reduces principal. For example, on a $20,000 4-year loan, raising the rate from 4% to 8% increases the monthly payment by roughly $40 and total interest by nearly $1,000. Even a 0.5% difference in rate can meaningfully change total cost on larger or longer loans like mortgages. Always compare the Annual Percentage Rate (APR) across lenders, not just the nominal rate.
What happens to my monthly payment if I extend the loan term?
Extending the loan term reduces your monthly payment because the principal is spread across more payments. However, you pay more total interest over the life of the loan since the balance accrues interest for longer. For instance, a $15,000 loan at 5% costs about $283/month over 5 years (total interest ≈ $1,984) but only $159/month over 10 years (total interest ≈ $4,122). A longer term improves short-term cash flow but increases the overall cost of borrowing. Use this calculator to find the term that balances affordable payments with acceptable total interest.
Why does my early loan payment go mostly to interest and not principal?
In an amortizing loan, each payment first covers the interest accrued on the current outstanding balance, and the remainder reduces the principal. Early in the loan the balance is at its highest, so interest charges are largest and little principal is repaid. As the balance shrinks over time, interest charges fall and the principal portion of each payment grows — this is the amortization schedule. By the final payments, nearly the entire amount goes to principal. This front-loading of interest is why paying even a small amount extra early in a loan can significantly reduce total interest paid and shorten the loan term.