Loan Calculator

What a loan actually costs

Enter the amount, the rate and the term. The monthly payment appears immediately, and beside it the two numbers most calculators bury: the total interest, and the total you will hand over by the end.

The table below breaks the loan down year by year, so you can see how the split between interest and principal shifts over time.

Everything runs in your browser. Nothing is uploaded, stored or logged.

The formula

A loan with a fixed payment is an annuity, and the payment that clears it is:

Payment = P × r / (1 − (1 + r)−n)

Where P is the amount borrowed, r is the monthly interest rate — the yearly rate divided by 12 — and n is the number of monthly payments.

At a rate of zero the formula divides by zero, and the answer is simply the amount divided by the number of payments.

Why the payment is the wrong number to shop on

This is the single most useful thing on this page.

Lenders and dealers quote monthly payments, because a payment is what feels affordable. But the payment can be lowered arbitrarily by stretching the term, and stretching the term is exactly what makes the loan cost more.

Take $25,000 at 6.5%:

Over 3 years — $766.23 a month, $2,584 in interest.
Over 5 years — $489.15 a month, $4,349 in interest.
Over 7 years — $371.24 a month, $6,184 in interest.

The payment drops by half. The interest goes up by two and a half times. Both are true at once, and only one of them is on the advertisement.

So decide the term first, on how quickly you want to be out of the debt, and then check whether the payment fits. Doing it the other way round is how people end up seven years into a five-year car.

Reading the year-by-year table

Interest is charged on what you still owe. At the start, you owe nearly all of it, so nearly all of your payment is interest.

On a $200,000 30-year loan at 6%, the first twelve payments retire 1.2% of the balance. Interest is 53.7% of everything repaid across the full term. And the crossover — the first payment where more goes to principal than to interest — does not arrive until payment 223, in year 19 of 30.

This is not a trick; it is what “interest on the outstanding balance” means. But it has two practical consequences worth knowing:

Early extra payments are worth far more than late ones. A dollar paid off in year one avoids interest for 29 years. The same dollar in year 25 avoids it for five.

Selling or refinancing early means you have built less equity than the years suggest. Five years into that same 30-year loan you have repaid 6.9% of it, not the 17% the calendar implies.

Interest rate and APR

Two numbers, routinely confused, and the difference is the whole point of one of them.

The interest rate is the cost of borrowing the money. It is what this calculator uses.

The APR folds in the fees the lender charges to set up the loan — arrangement fees, origination fees, some insurance — and expresses the lot as a yearly percentage. Because it includes those costs, it is almost always higher than the interest rate, and it is the number that lets you compare two offers honestly.

In many countries lenders are legally required to disclose the APR for exactly this reason. Compare on APR. A loan with a lower rate and a large arrangement fee can easily be the more expensive one.

Which also means a real agreement will cost slightly more than this page shows, since the fees are not modeled here.

The last payment

You may notice the final payment is a few cents different from all the others. That is deliberate, and it is what real lenders do.

Interest is rounded to the nearest cent every month, and those roundings accumulate over hundreds of payments. Rather than leave a balance of $0.03 — or refund $0.02 — the last payment absorbs the difference so the loan ends at exactly zero.

Paying off early

Not modeled here, but worth understanding because the effect is larger than most people expect.

An extra payment comes straight off the principal, and every future interest charge is calculated on that smaller balance. So the saving compounds.

On a 30-year loan, making one extra monthly payment each year takes roughly four to six years off the term — four at 4%, five at 6%, six at 7%. The higher the rate, the more it saves, because the balance you are removing was accruing faster.

Two cautions. Check for an early-repayment charge — some agreements penalize it, particularly fixed-rate ones. And make sure the lender applies the extra to principal rather than treating it as the next payment in advance, which achieves almost nothing.

What this does not model

A fixed-rate loan paid on schedule, and nothing more.

Not modeled: arrangement and origination fees; payment protection insurance; variable rates that move during the term; interest-only or balloon structures; early-repayment charges; late fees; or, for a mortgage specifically, property tax, buildings insurance and mortgage insurance — which together often add a third again to what you actually pay each month.

For a home loan with those included, use a mortgage calculator. For anything you are about to sign, use the lender’s own figures — this page is for understanding the shape of a loan, not for agreeing to one.

Frequently asked questions

How is the monthly payment worked out?

With the standard annuity formula: P × r / (1 − (1 + r)−n), where P is the amount borrowed, r is the monthly rate (the yearly rate divided by 12) and n is the number of payments. It finds the level amount that clears the balance in exactly n payments.

Why is the last payment slightly different?

Because interest is rounded to the cent every month, so the rounding accumulates over the term. The final payment is trimmed so the balance lands on exactly zero. Real lenders do the same, which is why your last statement rarely matches the others to the penny.

What is the difference between the interest rate and the APR?

The interest rate is the cost of borrowing the money. The APR folds in the arrangement fees the lender charges, so it is the number that lets you compare two offers fairly — and it is usually higher. This calculator works from the interest rate, so a real agreement will cost slightly more than it shows.

Why is so much of my early payment interest?

Interest is charged on what you still owe, and at the start you owe almost all of it. On a 30-year loan at 6%, the first year retires only about 1% of the balance. The year-by-year table shows the crossover, and it comes later than most people expect.

Does a longer term save me money?

It lowers the monthly payment and raises the total cost, usually by a lot. Stretching a loan from 5 years to 7 can add half again as much interest. The payment is what you can afford; the total is what it costs, and they are different questions.

Does this handle extra payments?

Not yet — it models a standard loan paid on schedule. Paying extra reduces both the interest and the term, often dramatically, because every extra dollar comes straight off the principal that all future interest is charged on.

Is any of this financial advice?

No. It is arithmetic. A real agreement has fees, insurance and sometimes early-repayment charges that are not modeled here. Compare offers on APR and read the agreement before signing.