Loan Calculator
Calculate monthly payments, total cost, and interest for any fixed-rate loan.
How Loan Payments Are Calculated
Fixed-rate loans use an amortization formula to determine equal monthly payments that cover both principal and interest. This applies to auto loans, personal loans, and other installment debt.
The Formula
M = P × [r(1+r)n] / [(1+r)n − 1]
Where: M = monthly payment, P = loan amount, r = monthly interest rate, n = total number of payments.
Example: Auto Loan
| Loan Amount | Rate | Term | Monthly Payment | Total Interest |
|---|---|---|---|---|
| $25,000 | 5.5% | 5 years | $477 | $3,638 |
| $25,000 | 5.5% | 3 years | $754 | $2,135 |
A shorter term increases the monthly payment but significantly reduces total interest paid. Always compare the total cost, not just the monthly payment.
Frequently Asked Questions
How does loan term affect total cost?
A longer term means lower monthly payments but more total interest. A shorter term means higher monthly payments but less total interest paid over the life of the loan.
What is a good interest rate for a personal loan?
Rates vary by credit score and lender. Excellent credit may qualify for 6–8%, good credit 9–12%, and fair credit 13–20%. Always shop multiple lenders to find the best rate.
Does this calculator work for variable-rate loans?
This calculator assumes a fixed interest rate. For variable-rate loans, the payment changes when the rate adjusts. Use the current rate to estimate your initial payment.