Money
Loan Payment Calculator
Enter the amount, the annual rate and the term. The interest total is the part a monthly figure hides.
The formula
monthly rate r = annual rate ÷ 100 ÷ 12
number of payments n = years × 12
payment = principal × r ÷ (1 − (1 + r)^−n)
total interest = payment × n − principal
Worked example
$25,000 borrowed over 5 years at 6.5%
- r = 0.065 ÷ 12 = 0.00541667 per month, n = 60 payments
- payment = 25,000 × 0.00541667 ÷ (1 − 1.00541667⁻⁶⁰) = $489.15
- 489.15 × 60 = $29,349.22 repaid in total
- Interest = 29,349.22 − 25,000 = $4,349.22
Where this goes wrong
Comparing monthly payments instead of total cost
A longer term always lowers the payment and almost always raises the price. The same $25,000 at 6.5% is $489.15 a month over five years and $334.66 over eight — $154.50 easier every month, and $2,777.74 more interest by the end. A lender who opens with "what monthly payment are you comfortable with?" is asking a question whose answer sets the price.
Questions
- Is this the APR?
- No. This uses the nominal annual rate divided into twelve monthly periods, which is how a standard amortised loan is built. The APR folds fees and charges into a single figure, so for the same loan it is higher than the rate. Compare offers by APR; calculate payments from the rate.
- Why is so much of the early payment interest?
- Because interest is charged on what you still owe, and at the start you still owe nearly all of it. On the example above, $135.42 of the first $489.15 goes to interest and only $353.73 reduces the balance. By the last payment those proportions have almost exactly reversed.
- Does paying extra help?
- On a normally amortised loan, yes, and by more than people expect: an overpayment goes straight against the balance, so it cancels every future interest charge that balance would have carried. This page does not model overpayments — check your agreement, because some loans restrict them or charge for them.
- What about a 0% loan?
- The formula divides by the rate, so zero is handled separately rather than producing nonsense: the payment becomes the amount divided by the number of payments and the interest is zero. Enter 0 and that is what you get.