Loan Payment Calculator
Calculate the fixed monthly payment on an amortizing loan from the principal, annual interest rate, and loan term in years. Use it for car loans, student loans, personal loans, and small-business loans — anywhere you borrow a lump sum and pay it back in equal monthly installments over a fixed period.
About this calculator
The formula is the standard fully-amortizing-loan equation: 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), and n is the total number of monthly payments (loan term × 12). The result is the fixed monthly payment that, applied consistently for n months, drives the loan balance to exactly zero. Each payment splits into an interest portion (computed on the remaining balance at the start of the month) and a principal portion (everything left after interest); early in the loan the interest share is large, and late in the loan the principal share dominates. This shifting split is what "amortization" means. Edge cases: a rate of 0% breaks the formula (division by zero) — for an interest-free loan the monthly payment is simply P ÷ n. Very short loan terms (1–2 years) make the payment nearly equal to principal divided by months because interest has little time to accumulate; very long terms (25+ years) push total interest paid above the original principal at typical rates. The formula assumes the interest rate is fixed for the entire term — it does not model variable-rate loans, balloon payments, or interest-only periods. It also assumes monthly compounding; loans quoted with different compounding conventions (daily for credit cards, semi-annual for some Canadian mortgages) need a small adjustment to r before plugging in. The total amount paid over the loan's life is M × n; total interest paid is that figure minus P.
How to use
Example 1 — Auto loan. You finance a $32,000 car at 6.9% APR over 5 years. Enter 32000 for Loan Amount, 6.9 for Annual Interest Rate, and 5 for Loan Term. Result: approximately $632 per month. Verify: r = 0.069/12 = 0.00575, n = 60, (1.00575)^60 ≈ 1.4106, so 32000 × (0.00575 × 1.4106) / (1.4106 − 1) ≈ 32000 × 0.008111 / 0.4106 ≈ $632. ✓ Over the life of the loan you pay 632 × 60 = $37,920, of which $5,920 is interest. Example 2 — Personal loan. You take a $12,000 personal loan at 11.5% APR over 3 years. Enter 12000, 11.5, and 3. Result: approximately $395 per month. Verify: r = 0.115/12 ≈ 0.009583, n = 36, (1.009583)^36 ≈ 1.4109, so 12000 × (0.009583 × 1.4109) / 0.4109 ≈ 12000 × 0.013522 / 0.4109 ≈ $395. ✓ Total paid is 395 × 36 = $14,220, with $2,220 in interest — more than 18% of the original loan in interest cost, reflecting the higher rate on unsecured personal lending.
Frequently asked questions
What is the difference between APR and interest rate?
The nominal interest rate is the percentage charged on the outstanding loan balance, while APR (annual percentage rate) is the all-in cost of borrowing including origination fees, mortgage insurance, points, and other upfront charges spread across the loan's life. APR is always greater than or equal to the nominal rate, and in the US it is the figure lenders are required by Regulation Z to disclose so that loans with different fee structures can be compared on equal footing. This calculator uses the nominal interest rate, so if you want a payment that reflects the true cost of borrowing, plug in the APR instead. For mortgages, the difference between nominal and APR is typically 0.1–0.4 percentage points; for personal loans with origination fees, it can be 1–3 points.
How does the loan term affect total interest paid?
Longer terms reduce the monthly payment but increase total interest paid dramatically, because each month's interest is charged on a balance that takes longer to come down. On a $30,000 auto loan at 7%, a 4-year term costs about $719/month and $4,500 total interest; a 6-year term costs about $512/month but $6,860 total interest; a 7-year term costs about $453/month and $8,030 total interest. The 7-year option saves $266/month over the 4-year version but costs an extra $3,500 in interest. The same dynamic is much more extreme for mortgages: a 30-year loan typically pays more total interest than principal, while a 15-year loan pays roughly half as much interest. Match the term to the useful life of what you're financing and to the speed at which you can comfortably repay.
Can I save money by making extra principal payments?
Yes, and the savings can be substantial because every extra dollar paid to principal reduces the base on which all future interest is calculated. On a $30,000 5-year auto loan at 7%, adding $50 to every monthly payment pays the loan off about 7 months early and saves roughly $400 in interest. On a 30-year mortgage, making just one extra full payment per year shortens the loan by 4–6 years and can save $40,000+ in interest on a typical balance. Always confirm with your lender that extra payments are applied to principal (not to "advance" your next monthly payment), and check for prepayment penalties — most modern consumer loans do not charge them, but some older or commercial loans still do. Mathematically, extra principal payments earn a guaranteed risk-free return equal to your interest rate, which beats almost any other safe investment.
What are the most common mistakes people make when shopping for loans?
The most common is focusing on the monthly payment instead of the total cost of borrowing — a longer-term loan with a "lower monthly" often costs much more in total interest. The second is confusing nominal interest rate with APR; ignoring fees can hide thousands in real cost. The third is not shopping multiple lenders: rates can vary by 1–3 percentage points between lenders for the same borrower, and the savings on a typical car loan or mortgage from comparison-shopping easily reach $1,000–$10,000. The fourth is rolling existing debt (a trade-in car loan, credit-card balance) into a new loan, which silently extends the repayment period and inflates interest. Finally, people often miss that "0% financing" promotional loans usually require giving up a cash-rebate offer that would have been worth more than the interest savings — always run the math with and without the rebate before accepting promotional financing.
When should I not use this calculator?
Skip it for variable-rate loans (most credit cards, some private student loans, HELOCs) — the formula assumes a fixed rate, so the payment estimate breaks down when the rate changes. It is the wrong tool for interest-only loans, balloon-payment loans, and reverse mortgages, all of which have very different payment structures. Do not use it for mortgages where you want to include taxes, insurance, or PMI in the monthly figure — use a dedicated mortgage payment calculator for full PITI. It also does not handle loans with irregular payment schedules (biweekly, weekly) without re-converting the rate. For credit-card minimum-payment calculations, this formula assumes you pay the same fixed amount; real credit cards compute a sliding minimum that changes monthly as the balance falls, so use a dedicated credit-card payoff calculator instead.