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Loan Calculator

Calculate monthly loan payments, total interest, and payment schedule for personal loans, auto loans, or any fixed-rate loan.

Loan Worksheet
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How Loan Payments Work

Fixed-rate loans use amortization: each monthly payment is identical, but the split between interest and principal shifts over time. Early payments are mostly interest; later payments are mostly principal.

Loan Payment Formula

PMT = P × [r(1+r)^n] / [(1+r)^n - 1]

  • PMT: Monthly payment
  • P: Principal (loan amount)
  • r: Monthly interest rate (annual rate ÷ 12)
  • n: Total number of payments (years × 12)

Example: $10,000 Loan at 8% for 5 Years

  • Monthly payment: $202.76
  • Total payments: $12,166
  • Total interest: $2,166
  • First payment: $67 to interest, $136 to principal
  • Last payment: $1.35 to interest, $201 to principal

How Loan Term Affects Cost

On a $25,000 loan at 7%:

  • 3-year term: $772/mo payment, $2,777 total interest
  • 5-year term: $495/mo payment, $4,700 total interest
  • 7-year term: $379/mo payment, $6,809 total interest

The longer the term, the lower the monthly payment — but you pay significantly more in total interest. A 7-year term costs nearly 2.5× more interest than a 3-year term.

Types of Loans

  • Personal loans: Unsecured, fixed rate, 2-7 year terms. Rates depend heavily on credit score (6-36% APR)
  • Auto loans: Secured by the vehicle. Lower rates than personal loans (4-12%). Longer terms (72-84 months) can lead to being "underwater"
  • Home equity loans: Secured by your home. Lowest rates but risk of foreclosure. Interest may be tax-deductible

Tips for Better Loan Terms

  • Check your credit score first: Scores above 740 qualify for the best rates. Each 50-point drop can add 1-4% to your rate
  • Get pre-qualified with multiple lenders: Rate shopping within a 14-day window counts as a single credit inquiry
  • Consider secured loans: Collateral (car, savings account) often means 2-5% lower rates
  • Choose the shortest affordable term: Lower total cost even though monthly payments are higher
  • Make extra principal payments: Even $50/month extra on a $20,000 loan at 8% saves $1,600 in interest and pays off 14 months early
  • Set up autopay: Many lenders offer 0.25-0.50% rate discount for automatic payments

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Frequently Asked Questions

How is a monthly loan payment calculated?

Monthly payment = P × r(1+r)^n / ((1+r)^n - 1), where P is the amount borrowed, r is the annual rate divided by 12, and n is the number of monthly payments. The formula keeps every payment the same while the split shifts over time: early payments are mostly interest, later payments mostly principal.

What is the monthly payment on an $8,000 loan at 9% for 3 years?

About $254 a month. Across all 36 payments the total paid is roughly $9,158, of which about $1,158 is interest. The first payment sends about $60 to interest and $194 to principal, and the interest share shrinks with every payment after that as the balance falls.

What is the difference between interest rate and APR on a loan?

APR is the interest rate plus origination fees and other lender charges, expressed as a yearly rate, so it is the fuller measure of what a loan costs. The interest rate alone is only the base cost of borrowing the principal. Two loans with the same rate can carry different APRs, so compare APR when shopping between lenders.

Is a shorter or longer loan term better?

A shorter term costs less in total, while a longer term costs less per month. Shorter loans carry higher payments but far less interest because the balance falls faster. Longer loans ease the monthly budget but raise the total cost. Paying extra toward principal on a longer loan, when there is no prepayment penalty, recovers part of the savings of a shorter term.