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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 loan payment calculated?

Monthly payment = P × [r(1+r)^n] / [(1+r)^n - 1], where P is principal, r is monthly rate, n is number of payments.

What affects my loan rate?

Credit score, loan amount, loan term, collateral, and current market rates all influence your interest rate.

Should I get a shorter or longer loan term?

Shorter terms have higher payments but lower total interest. Longer terms have lower payments but higher total cost.

Can I pay off a loan early?

Usually yes, but check for prepayment penalties. Paying extra toward principal reduces total interest paid.

What is the principal of a loan?

The principal is the original amount borrowed, not counting interest. As you make payments, the principal balance decreases. Interest accrues only on the remaining principal, so paying it down faster reduces total interest cost.

Example: what does an $8,000 loan at 9% for 3 years cost in total?

Monthly payment works out to about $254. Total paid across all 36 payments is roughly $9,155. Total interest is about $1,155. The first payment sends approximately $60 to interest and $194 to principal.

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

The interest rate is the base cost of borrowing the principal. APR adds origination fees and other lender charges, making it a fuller measure of the true annual cost. Always compare APR when shopping between lenders.

Is there a quick way to estimate a monthly loan payment in my head?

Multiply the loan amount by the monthly rate (annual rate divided by 12) to find the first-month interest portion, then add the loan amount divided by the number of months for a rough principal portion. The sum slightly overestimates the actual amortized payment but works as a quick sanity check.