Loan Calculator

Three loans, side by side

The most useful thing you can do with this calculator is run the same loan amount through different rates and terms, then look at the total-interest column. The headline payment is comfortable; the lifetime cost is where the actual decision lives. Take a $25,000 loan and try these three:

• 5 years at 7%: $495/month, total interest paid: $4,702.
• 7 years at 7%: $377/month, total interest paid: $6,679 — about 42% more interest for the same loan.
• 5 years at 9%: $519/month, total interest paid: $6,128 — same term, two percentage points higher rate, $1,400 more in interest.

Stretching the term lowers the payment but costs you years of extra interest; tolerating a higher rate at the same term costs less than people expect. Both levers matter, but they trade against each other in non-obvious ways. Always look at total interest, not the monthly payment alone.

Reading your amortization schedule

Every monthly payment on a fixed-rate loan splits into two pieces: interest accrued on the remaining balance this month, and the rest, which pays down principal. Early in the loan, the balance is large, so interest takes most of the payment. Late in the loan, the balance is small, so almost all of the payment is principal.

On the 5-year, 7% loan above: the very first payment of $495 is roughly $146 interest and $349 principal. By payment 30 (the midpoint), it's about $85 interest and $410 principal. By the final payment, it's about $3 interest and $492 principal. The total payment never changes; the split inside it does. This is why extra payments early save dramatically more than extra payments late — every dollar of principal you remove early avoids years of accruing interest on it.

When the calculator and the lender disagree

This calculator returns the principal-and-interest cost of a loan computed from the formula M = P · r · (1 + r)ⁿ / ((1 + r)ⁿ − 1). Real-world lender quotes can include several things that change the number you actually pay:

• Origination fees — typically 1%–8% of the loan, sometimes financed into the principal. The calculator does not know about them.
• The difference between APR and the note rate. APR includes fees; the note rate does not. The calculator uses the note rate. If the lender's APR is higher than the rate you typed in, fees are baked in.
• Daily-accrual vs monthly accrual. Most US installment loans use simple-daily-interest on the outstanding principal. The compound-monthly formula in this calculator is a close approximation for fixed-monthly-payment loans, but it can disagree with the lender's number by a few dollars per month.
• Insurance, GAP coverage, extended warranties rolled into the loan on auto purchases. These can add 10%+ to the financed amount.

If the lender's quoted payment is more than a few dollars off from this calculator, ask them to itemize the loan amount. The discrepancy is almost always a fee being financed, not a math error.

Different loan, different rate range

The formula is the same for every fixed-rate installment loan, but the rates vary by category. Roughly, in normal-rate periods:

• Personal loans (unsecured): 6%–36%, depending on credit.
• Auto loans (secured by the car): 4%–12%.
• Student loans: federal rates set annually (typically 5%–8%); private rates similar to personal loans.
• Mortgages (secured by the house): the lowest installment-loan category, currently in the 6%–8% range in the US.

Already paying down multiple balances? The debt payoff calculator and snowball vs avalanche calculator compare payoff orderings.

One thing to check before you sign

Ask the lender directly whether there is a prepayment penalty. Most fixed-rate installment loans in the US no longer carry them, but some auto loans and older personal loans still do — and if there is one, the strategy of paying extra against principal can backfire. Get the answer in writing before you start sending extra payments.