Loan Calculator

How to use this calculator

1. Enter the loan amount — the sum you actually borrow, after any deposit or trade-in.
2. Enter the interest rate the lender quoted, as an annual percentage.
3. Enter the term in years. Half years are fine; a 54-month loan is 4.5.

The monthly payment updates as you type. The three figures underneath show what the loan costs in total, how much of that is interest, and how many payments you will make.

How the calculation works

A fixed-rate loan is an amortising loan: you pay the same amount every month, and that single payment covers both the interest accrued that month and a slice of the balance. The payment is found with the annuity formula:

P = A x i / (1 - (1 + i)^-n)

• P — the monthly payment
• A — the amount borrowed
• i — the monthly interest rate, which is the annual rate divided by 12
• n — the total number of monthly payments, which is the term in years multiplied by 12

The awkward-looking (1 + i)^-n term is what makes the payment settle at exactly the level that clears the balance on the final month — no more, no less.

A worked example

Take a $25,000 loan at 7.5% over 5 years.

First convert the inputs into monthly terms. The monthly rate is 7.5% ÷ 12 = 0.625%, or 0.00625 as a decimal. The number of payments is 5 × 12 = 60.

Now substitute:

P = 25000 x 0.00625 / (1 - 1.00625^-60)
P = 156.25 / (1 - 0.688092)
P = 156.25 / 0.311908
P = 500.95

So the monthly payment is $500.95. Over 60 payments that totals $30,056.92, which means $5,056.92 of the money you repay is interest — a little over a fifth of the original loan on top of the loan itself.

Where the money actually goes

The payment never changes, but its composition does. In month one, interest is charged on the full $25,000: 25,000 × 0.00625 = $156.25. That leaves $344.70 to reduce the balance.

By the final month the balance is barely a few hundred dollars, so the interest portion is under $3 and nearly the whole payment clears the remaining principal. This is why the split feels lopsided at the start and why paying extra early is disproportionately effective.

Common mistakes to avoid

Comparing payments instead of totals. A longer term always produces a smaller monthly payment, which makes it look cheaper. Stretching the example above from 5 years to 7 drops the payment to $383.46 but raises total interest to $7,210.38 — over $2,150 more for the same $25,000. Always compare the total repaid, not the monthly figure.

Treating the quoted rate as the whole cost. Origination fees, arrangement fees and mandatory insurance are real costs that a bare interest rate does not capture. The APR does, which is why it is the number regulators require lenders to disclose and the number worth comparing between offers.

Forgetting that the rate may not be fixed. This calculator assumes the rate holds for the whole term. On a variable-rate loan the payment can move, so it is worth re-running the numbers at a rate two or three percentage points higher to see whether the payment would still be affordable.

Overlooking the effect of a small extra payment. Because interest is charged on the outstanding balance, an extra $50 a month on the example loan clears it six months early and saves about $564 in interest. Nothing about the loan agreement changes — the balance simply falls faster.

When this calculator is not the right tool

Use a dedicated mortgage calculator for property, where property taxes, insurance and escrow usually sit alongside the principal and interest payment. For credit cards, the balance and the minimum payment both change monthly, so the fixed-payment maths here does not apply. And for interest-only or balloon structures, the payment covers interest alone until a large final lump sum falls due — a different calculation entirely.

For anything with a fixed amount, a fixed rate and a fixed term — personal loans, car finance, student loans, equipment finance — this is the right model.