How to use the loan calculator
- Loan amount — the amount you borrow (for a house or car, the price minus your down payment).
- Interest rate — the yearly rate from your lender. Using the APR gives a more complete picture.
- Term — how many years you will take to repay. Common terms: 3–7 years for cars, 15 or 30 years for mortgages.
- Extra monthly payment (optional) — see how paying a little more shortens the loan and saves interest.
Results update as you type. Scroll the schedule to see exactly how each payment is split between interest and principal.
Understanding amortization
With a standard fixed-rate loan, every monthly payment is the same, but what it pays for changes over time. Interest is charged on the remaining balance, so early payments are mostly interest and only a small part reduces what you owe. As the balance falls, less interest is due and more of each payment goes to principal. That is why, on a 30-year mortgage, the balance barely moves in the first few years and then drops quickly toward the end.
The formula
The monthly payment is M = P × r(1 + r)n ÷ ((1 + r)n − 1), where
P is the principal, r the monthly rate (annual rate ÷ 12 ÷ 100) and n the
number of payments. For example, $25,000 at 7.5% over 5 years is r = 0.00625 and n = 60, giving a
payment of about $501 and roughly $5,056 in total interest.
How to pay less interest
- Choose a shorter term. Monthly payments are higher but total interest is much lower.
- Make extra payments. Try adding $50 or $100 above and watch the payoff time drop.
- Improve your credit score before applying — even 1% lower can save thousands on a large loan.
- Make a bigger down payment to reduce the amount borrowed.
- Compare lenders using APR, not just the headline rate.
Curious how the same money would grow if you saved it instead? Try the Compound Interest Calculator.
Frequently asked questions
How is the monthly payment calculated?
It uses the standard amortization formula M = P × r(1+r)^n / ((1+r)^n − 1), where P is the loan amount, r is the monthly interest rate (annual rate ÷ 12) and n is the number of monthly payments.
Does this include taxes, insurance or fees?
No. It calculates principal and interest only. For a mortgage, add property tax, home insurance and any mortgage insurance to get your full monthly cost.
What is APR vs interest rate?
The interest rate is the cost of borrowing the principal. APR (annual percentage rate) also includes certain fees, so it is usually a bit higher. Use APR here for a more realistic total cost.
Does it work for mortgages, car loans and personal loans?
Yes. Any fixed-rate loan with equal monthly payments works: mortgages, auto loans, student loans and personal loans.
How do extra payments help?
Any extra payment goes straight to principal, which reduces the interest charged every month after. Even small extra payments can cut years off a long loan.