Loan Payment Calculator
Loan Calculator
A loan calculator helps you understand the true cost of borrowing by computing monthly payments, total interest, and total amount paid over the life of the loan.
Conversion Formula
M = P × [r(1+r)^n] / [(1+r)^n - 1]. P = principal, r = monthly interest rate (annual ÷ 12), n = number of monthly payments.
Step-by-Step Examples
$25,000, 6.5%, 60 months = $489.15/month
Total paid: $29,349; Interest: $4,349
$10,000, 5%, 36 months = $299.71/month
Total paid: $10,789; Interest: $789
$50,000, 8%, 120 months = $606.64/month
Total paid: $72,797; Interest: $22,797
History
Amortization tables have been used since the early days of banking. The mathematical formula became widely used with the advent of consumer lending in the 20th century.
Common Use Cases
- Auto loan comparison
- Personal loan planning
- Student loan estimation
- Debt consolidation analysis
Frequently Asked Questions
How is monthly loan payment calculated?
Using the amortization formula: M = P × [r(1+r)^n] / [(1+r)^n - 1], where P is principal, r is monthly rate, and n is number of payments.
What is APR vs interest rate?
APR (Annual Percentage Rate) includes fees and closing costs in addition to the interest rate, giving a more complete picture of borrowing cost.
How can I reduce total interest paid?
Make extra payments, choose a shorter term, refinance at a lower rate, or make biweekly payments instead of monthly.
What is amortization?
Amortization is the process of paying off a loan through regular payments that cover both principal and interest over time.
Does this calculator work for car loans?
Yes, this calculator works for any fixed-rate installment loan including auto loans, personal loans, and student loans.
What happens if I pay more than the minimum?
Extra payments go directly toward principal, reducing total interest and shortening the loan term.
What is a good interest rate for a loan?
Good rates depend on loan type, credit score, and market conditions. As of 2024, auto loans range 4-7%, personal loans 6-15%.