Loan

1. Enter your **Loan Amount** — the total principal you plan to borrow (e.g., $15,000).
2. Enter the **Annual Interest Rate** as a percentage (e.g., 7.5%). Use the APR shown by your lender for the most accurate result.
3. Enter the **Loan Term** in years (e.g., 3, 5, or 10 years). You can also input months directly if your term is not a round number of years.
4. Click **Calculate** to instantly see your fixed monthly payment, total amount repaid, and total interest paid over the life of the loan.
5. Review the optional **Amortization Schedule** to see how each payment is split between interest and principal month by month.
6. Adjust any input to compare scenarios — for example, a shorter term reduces total interest but raises the monthly payment.

M = P × [r(1 + r)ⁿ] / [(1 + r)ⁿ − 1]

• M — The fixed monthly payment amount (in dollars).
• P — The principal — the original loan amount borrowed (in dollars).
• r — The monthly interest rate, calculated as the annual interest rate (APR) divided by 12. For example, a 6% annual rate gives r = 0.06 / 12 = 0.005.
• n — The total number of monthly payments, equal to the loan term in years multiplied by 12. For example, a 5-year loan gives n = 60 payments.

M = 15,000 × [0.00625 × (1 + 0.00625)⁶⁰] / [(1 + 0.00625)⁶⁰ − 1]

Step 1: (1.00625)⁶⁰ = 1.45393 (approx.)
Step 2: Numerator = 0.00625 × 1.45393 = 0.009087
Step 3: Denominator = 1.45393 − 1 = 0.45393
Step 4: M = 15,000 × (0.009087 / 0.45393) = 15,000 × 0.020013 = 300.20

Result: Monthly Payment: **$300.20** | Total Repaid: $300.20 × 60 = **$18,012.00** | Total Interest Paid: $18,012.00 − $15,000 = **$3,012.00**

Your fixed monthly payment of $300.20 stays the same for all 60 months. Over the life of the loan, you repay a total of $18,012.00, meaning you pay $3,012.00 in interest on top of the $15,000 principal. In the early months, a larger share of each payment goes toward interest; as the principal shrinks, more of each payment chips away at the balance — this is the nature of amortization.

Note: Results are estimates based on the inputs provided. Actual payments may vary depending on your lender's compounding method, fees, prepayment rules, or rounding conventions. Always confirm final terms with your lender.

Understanding Loan Amortization

Amortization is the process of spreading a loan into equal periodic payments so that the balance reaches zero at the end of the term. Although every monthly payment is the same dollar amount, the split between interest and principal changes every month.

How Amortization Works

• Month 1: Most of your payment covers interest (calculated as balance × monthly rate). A small portion reduces principal.
• Month 30 (midpoint): Roughly half the payment goes to interest, half to principal.
• Final months: Almost all of each payment reduces principal, with very little interest remaining.

This is why paying extra toward principal early — even a small amount — can dramatically reduce total interest paid and shorten the loan term.

Key Factors That Affect Your Payment

| Factor | Effect | |---|---| | Higher loan amount | Higher monthly payment and more total interest | | Higher interest rate | Higher monthly payment and significantly more interest over time | | Longer term | Lower monthly payment, but much more total interest paid | | Shorter term | Higher monthly payment, but far less total interest paid |

APR vs. Interest Rate

Lenders often advertise both an interest rate and an APR (Annual Percentage Rate). The APR includes fees (origination fees, etc.) and is typically higher than the stated rate. For estimating total cost of a loan, use the APR. For calculating the periodic payment alone, the stated interest rate is typically used.

Simple vs. Amortizing Loans

This calculator uses the amortizing (installment) loan model — fixed payments over time. Some products (like interest-only loans or balloon loans) use different structures and would produce different results.

Financial Disclaimer

Results produced by this calculator are estimates for educational and planning purposes only. They do not constitute financial advice. Actual loan terms, including payment amounts, total interest, and fees, will be determined by your lender and may differ from these estimates. Consult a licensed financial advisor or your lender for personalized guidance.

• **Using the annual rate instead of the monthly rate:** The formula requires r = annual rate ÷ 12. Plugging in the full annual rate will produce a wildly incorrect result.
• **Confusing loan term units:** Make sure n equals the number of *months*, not years. A 5-year loan = 60 monthly payments, not 5.
• **Ignoring fees and APR:** The calculator computes payments based on interest rate alone. Origination fees, closing costs, or insurance premiums increase your true cost and are not reflected unless you include them in the principal.
• **Assuming the quoted rate is the APR:** Always ask your lender whether the rate quoted is the simple interest rate or the APR — the difference affects true total cost.
• **Not accounting for prepayment penalties:** Some loans charge a fee if you pay off the balance early. Extra principal payments may save interest but could trigger penalty clauses.
• **Rounding the monthly rate:** Using a rounded monthly rate (e.g., 0.006 instead of 0.00625) can cause cumulative rounding errors across 60+ payments.

• Mortgages and Loans – Consumer Financial Protection Bureau — Consumer Financial Protection Bureau (CFPB)
• How to Calculate a Loan Payment – Federal Reserve Bank of St. Louis (FRED Education) — Federal Reserve Bank of St. Louis
• Understanding Loan Amortization – Investor.gov — U.S. Securities and Exchange Commission (SEC) – Investor.gov
• Annual Percentage Rate (APR) – Federal Reserve Regulation Z (Truth in Lending Act) — Consumer Financial Protection Bureau (CFPB)

Only sources that have been reviewed are shown. Unverified citations are never published.