On this page
Formula
M = P × r(1 + r)^n ÷ ((1 + r)^n − 1); if r = 0, M = P ÷ n
- M
- the fixed monthly payment
- P
- the loan amount (principal)
- r
- the monthly interest rate, the annual rate ÷ 12 as a decimal (7.2% a year → 0.006)
- n
- the number of monthly payments (years × 12)
What the calculator works out
Enter the loan amount, the annual interest rate and the term, and the loan calculator returns:
- Monthly payment. The fixed amount that repays the loan in full by the end of the term.
- Number of payments. The term in months.
- Total interest. Everything you pay beyond the amount borrowed.
- Total of all payments. Principal plus interest.
- Amortization schedule. For each year, how much principal and interest you paid and the balance remaining at the end of that year.
It works for any fixed-rate loan repaid in equal monthly installments, such as a car loan, personal loan or student loan. For a home purchase, the mortgage calculator starts from the price and down payment and can add property tax and insurance.
How loan payments are calculated
Each month, interest is charged on the outstanding balance at one-twelfth of the annual rate. The rest of the payment reduces the balance. The payment formula finds the single amount that, repeated every month, brings the balance to exactly zero with the final payment.
The loan calculator then steps through every month to build the schedule. It keeps full precision rather than rounding each payment to the cent, and the last payment is whatever clears the remaining balance. If the rate is 0%, the payment is simply the loan amount divided by the number of months.
Reference tables
Figures were calculated with the same formula the calculator uses, assume a fixed rate with no fees, and are rounded to the cent.
Payment on a $20,000 loan by term
| Term | Payment at 7.5% | Total interest at 7.5% | Payment at 9% | Total interest at 9% |
|---|---|---|---|---|
| 24 months | $899.99 | $1,599.80 | $913.69 | $1,928.68 |
| 36 months | $622.12 | $2,396.48 | $635.99 | $2,895.81 |
| 48 months | $483.58 | $3,211.75 | $497.70 | $3,889.64 |
| 60 months | $400.76 | $4,045.54 | $415.17 | $4,910.03 |
| 72 months | $345.80 | $4,897.76 | $360.51 | $5,956.77 |
| 84 months | $306.77 | $5,768.30 | $321.78 | $7,029.65 |
Going from 24 to 84 months cuts the payment at 7.5% by about two-thirds but multiplies total interest by about 3.6.
Payment on a $20,000, 60-month loan by rate
| Interest rate | Monthly payment | Total interest |
|---|---|---|
| 5% | $377.42 | $2,645.48 |
| 7% | $396.02 | $3,761.44 |
| 9% | $415.17 | $4,910.03 |
| 12% | $444.89 | $6,693.34 |
| 15% | $475.80 | $8,547.92 |
| 20% | $529.88 | $11,792.66 |
Each step up in rate raises the payment modestly but the total interest substantially: at 20% the interest is more than four times the 5% figure.
Calculating a loan payment with interest by hand
Take $8,000 at 9% a year, repaid over 24 months.
- Monthly rate: r = 0.09 ÷ 12 = 0.0075.
- Growth factor: (1 + r)^n = 1.0075^24 ≈ 1.196414.
- Payment: M = 8,000 × 0.0075 × 1.196414 ÷ (1.196414 − 1) ≈ $365.48.
- First month’s split: interest is $8,000 × 0.0075 = $60.00, so $305.48 of the first payment reduces the balance.
- Total interest: $365.4779 × 24 − $8,000 ≈ $771.47. Multiplying the payment rounded to $365.48 gives $771.52; the calculator keeps full precision, which is why lender schedules can differ by a few cents.
Each later month repeats step 4 on the new, lower balance, which is why the interest share falls over time.
Reading the amortization schedule
On a typical loan the early years are mostly interest and the later years mostly principal, even though the payment never changes. The schedule makes this visible: compare the “Interest paid” column in year 1 with the final year. The remaining balance also falls slowly at first and faster toward the end.
This matters if you plan to sell, refinance or pay the loan off early, because after a few years you may owe more than a straight-line estimate would suggest. The guide to how loan amortization works explains the pattern in more detail.
Real-life scenarios
A car loan compared with a personal loan
Auto loans are secured by the vehicle, while most personal loans are unsecured, and lenders often price that difference into the rate. On $25,000 over 60 months, a 6.5% auto loan costs $489.15 a month and $4,349.22 in interest. A 12% personal loan for the same amount and term costs $556.11 a month and $8,366.67 in interest. The trade-off for the lower rate is that the lender can repossess the car if payments stop.
Refinancing partway through
A $25,000 loan at 11% over 60 months has a payment of $543.56. After 12 payments the balance is $21,031.13, and the remaining 48 payments would include $5,059.78 of interest. Refinancing that balance at 7% for 48 months gives a payment of $503.62 and $3,142.47 of interest, about $1,917 less before any refinancing fees. Extending the new term beyond 48 months would lower the payment further but give back part of that saving.
Paying a little extra each month
On $20,000 at 7.5% over 60 months, the scheduled payment is $400.76 and total interest is $4,045.54. Paying $450.76 instead clears the loan in 53 months with $3,496.52 of interest; paying $500.76 clears it in 47 months with $3,080.99. These figures assume the lender applies the extra amount to principal and charges simple interest on the remaining balance. On a loan with precomputed interest, extra payments do not reduce interest the same way.
Rate, term and amount
All three inputs change the result, in different ways:
- Amount. Payment and total interest scale in direct proportion. Borrowing 10% more means paying 10% more each month.
- Rate. A higher rate raises both the payment and the total interest. Its effect grows with the length of the term.
- Term. A longer term lowers the payment but raises the total interest. A shorter term does the opposite.
Ways to lower the total cost follow from these: a smaller amount (a larger down payment or trade-in), a lower rate, a shorter term, or extra payments toward principal. Each one shrinks either the balance or the time over which interest accrues.
Interest rate vs. APR
Lenders quote both an interest rate and an annual percentage rate (APR). The interest rate is the cost of borrowing the principal. The APR also includes certain fees, such as origination charges, spread over the loan’s life, so it is usually higher. The calculator expects the interest rate, because the payment is worked out from the rate alone. If you only know the APR, entering it slightly overstates the payment.
APRs are the better figure for comparing offers. Consider $20,000 over 60 months: offer A at 7.5% with no fee, and offer B at 6.9% with a $600 fee deducted from the proceeds. B has the lower payment ($395.08 against $400.76) and less interest ($3,704.86 against $4,045.54), but once the fee is counted it costs $4,304.86 in total, and its APR works out to about 8.18%, above A’s 7.5%. The guide to APR vs. APY explains how these annualized rates are defined.
Common mistakes
- Comparing payments instead of total cost. A lower payment often comes from a longer term and more interest.
- Using the APR as the interest rate. It overstates the payment when the APR includes fees.
- Forgetting fees and add-ons. Origination fees, service contracts and insurance rolled into the loan increase the amount borrowed.
- Entering years with the unit set to months. A 5 entered as months is a 5-month loan, not 5 years.
Glossary
- Principal. The amount borrowed, or the part of the balance still owed.
- Amortization. Repaying a loan through equal installments that each cover that month’s interest plus some principal.
- Term. The number of months over which the loan is repaid.
- APR (annual percentage rate). The yearly cost of credit including the interest rate and certain fees, as defined by Regulation Z.
- Refinancing. Replacing an existing loan with a new one, usually to change the rate, term or payment.
Worked examples
A five-year car loan
$20,000 borrowed at 7.5% APR, repaid monthly over 5 years.
Inputs: Loan amount = $20000; Annual interest rate = 7.5 %; Loan term = 5; Term unit = Years
Answer: Borrowing $20,000.00 at 7.5% over 60 months: $400.76/month, $4,045.54 total interest.
A 36-month personal loan
$12,000 borrowed at 11.5% interest, repaid in 36 monthly payments.
Inputs: Loan amount = $12000; Annual interest rate = 11.5 %; Loan term = 36; Term unit = Months
Answer: Borrowing $12,000.00 at 11.5% over 36 months: $395.71/month, $2,245.63 total interest.
A longer, six-year auto loan
$35,000 financed at 6.25% over 6 years (72 payments), a common term for new vehicles.
Inputs: Loan amount = $35000; Annual interest rate = 6.25 %; Loan term = 6; Term unit = Years
Answer: Borrowing $35,000.00 at 6.25% over 72 months: $584.19/month, $7,061.71 total interest.
Assumptions and limitations
- The interest rate is fixed for the whole term, and payments are made monthly, starting one month after the loan begins.
- The monthly rate is the annual rate divided by 12. The rate you enter is treated as the loan's interest rate. If you enter an APR that includes fees, the payment shown will be slightly higher than the lender's.
- Every payment is the same amount and is not rounded to the cent. The last payment is adjusted to clear whatever balance remains, so the total may differ by a few cents from a lender's schedule that rounds each payment.
- The term must be a whole number of months, up to 600 months (50 years).
- Origination fees, other charges, late fees, insurance and extra or missed payments are not included.
Frequently asked questions
Why is so much of each early payment interest?
Interest each month is charged on the balance still owed. At the start the balance is at its highest, so the interest portion is largest and less of the payment reduces the principal. As the balance falls, the interest portion shrinks and more of the same payment goes to principal.
Does a longer term save money?
A longer term lowers the monthly payment but increases the total interest, because the balance stays higher for longer and interest is charged for more months. On $20,000 at 7.5%, stretching the term from 5 to 7 years lowers the payment from $400.76 to $306.77 but raises total interest from $4,045.54 to $5,768.30.
Should I enter the interest rate or the APR?
Enter the interest rate if you know it, because that is what determines the payment. The APR adds certain lender fees to the interest rate to show the overall cost of borrowing, so it is usually higher. The APR is useful for comparing offers, but using it here will slightly overstate the monthly payment.
How much does paying extra each month save?
It depends on the rate and how early the extra payments start. On a $20,000 loan at 7.5% over 5 years, adding $50 a month clears the loan in 53 months instead of 60 and cuts interest by about $549, assuming the lender applies the extra to principal and charges interest on the remaining balance. The calculator does not model extra payments directly.
Does the calculator work for a 0% loan?
Yes. With a 0% rate, the payment is the loan amount divided by the number of months, and total interest is zero. Some 0% promotions add fees or charge deferred interest if conditions are not met, which the calculator does not capture.
Can I enter the term in months?
Yes. Choose Months as the term unit and enter the number of payments, such as 36, 48 or 72. A term in years must work out to a whole number of months, so 2.5 years is accepted but 2.3 years is not.
How do you calculate loan interest?
Each month's interest is the balance still owed multiplied by the annual rate divided by 12, so $20,000 at 7.5% is charged $125.00 of interest in the first month. Total interest over the life of the loan is everything you repay minus the amount borrowed. On that loan over 60 months, it comes to $4,045.54.
Sources
- What is the difference between a loan interest rate and the APR? — Consumer Financial Protection Bureau. Checked October 4, 2026.
- What is amortization and how could it affect my auto loan? — Consumer Financial Protection Bureau. Checked October 4, 2026.
- What's the difference between a simple interest rate and precomputed interest on an auto loan? — Consumer Financial Protection Bureau. Checked October 4, 2026.
- § 1026.22 Determination of annual percentage rate — Consumer Financial Protection Bureau (Regulation Z). Checked October 4, 2026.