Loan Calculator
Determine the repayment schedule and total interest cost for any type of fixed-rate loan.
Loading...
Estimate Your Loan Payments and Total Interest
Our Loan Calculator helps you determine your monthly payments for any fixed-rate loan, such as an auto, personal, or student loan. See a full amortization schedule to understand how much you'll pay in principal and interest over the life of the loan.
What is a Loan Calculator?
A loan calculator is a financial tool that helps you estimate the periodic payments on a loan. By entering the loan amount, interest rate, and term, it calculates your monthly payment and provides a full amortization schedule. This schedule details how each payment is broken down into principal (the amount you borrowed) and interest (the cost of borrowing), showing you the total interest you'll pay over the loan's lifetime.
How It Works: The Loan Payment Formula
The calculator uses the standard formula for an amortizing loan:
M = P [ i(1 + i)ⁿ ] / [ (1 + i)ⁿ – 1 ]- P: The principal loan amount.
- i: The monthly interest rate (your annual rate divided by 12).
- n: The total number of payments (loan term in years × 12).
- Enter Loan Amount: Input the total amount you are borrowing.
- Enter Loan Term: Provide the number of years or months over which you'll repay the loan.
- Enter Interest Rate: Input the annual interest rate (APR) for the loan.
- Calculate: The tool instantly shows your monthly payment and the amortization schedule.
Interpreting the Results: Principal vs. Interest
The key results are your **Monthly Payment** and the **Total Interest Paid**. The amortization schedule shows that in the early stages of your loan, a larger portion of your payment goes to interest. As you continue to make payments, the principal portion grows, and the interest portion shrinks. The "Total Interest Paid" figure is a powerful number, as it reveals the true cost of borrowing the money over the entire term.
Common Loan Myths
- Myth 1: You should always take the longest loan term to get the lowest payment. While a longer term reduces your monthly payment, it dramatically increases the total amount of interest you'll pay. A shorter term saves you money if you can afford the higher payments.
- Myth 2: Making bi-weekly payments is the only way to pay off a loan faster. Making bi-weekly payments works because it results in one extra full payment per year. You can achieve the same result by simply making one extra payment of your choosing each year, or by adding a small extra amount to each monthly payment (ensure it's applied to principal).
- Myth 3: The interest rate is the only important factor. While crucial, you should also consider the loan's fees. The Annual Percentage Rate (APR) includes both the interest rate and fees, providing a more accurate measure of the loan's total cost.
Frequently Asked Questions
How do you calculate monthly loan payments?
Monthly loan payments are calculated using the formula M = P [i(1 + i)^n] / [ (1 + i)^n – 1 ], where P is the principal loan amount, i is the monthly interest rate, and n is the number of payments. Our Loan Calculator automates this to find your payment instantly.
What is loan amortization?
Loan amortization is the process of paying off a debt over time through regular payments. An amortization schedule, like the one generated by our calculator, shows how much of each payment goes toward interest and how much goes toward reducing your principal balance.
How can I pay my loan off faster?
You can pay your loan off faster by making extra payments directly toward the principal. Even small extra payments can save you a significant amount of interest and shorten your loan term. You can also make bi-weekly payments, which results in one extra full payment per year.
What is the difference between APR and interest rate?
The interest rate is the cost of borrowing the money. The Annual Percentage Rate (APR) is a broader measure of the cost of a loan, as it includes the interest rate plus other fees, such as loan origination fees. APR gives you a more complete picture of the total cost of borrowing.
Tips for Managing Your Debt
- Pay More Than the Minimum: Even an extra $25 or $50 a month can significantly reduce the total interest you pay and shorten your repayment period.
- Use the Debt Avalanche or Snowball Method: Focus on paying off one debt at a time by applying extra funds to either the highest-interest loan (avalanche) or the smallest-balance loan (snowball).
- Look into Refinancing: If your credit score has improved or interest rates have dropped, you may be able to refinance your loan to a lower rate, saving you money.
- Set Up Autopay: Automating your payments ensures you're never late, protecting your credit score from late payment penalties.
Advertisement Placeholder