Loan Calculator
Calculate your monthly loan repayment, total interest, and total cost for any fixed-rate loan. Enter the loan amount, annual interest rate, and repayment term.
How Loan Calculator works
The loan payment formula
Monthly payment is calculated using the standard amortisation formula: M = P × [r(1+r)^n] / [(1+r)^n − 1], where M is the monthly payment, P is the principal (loan amount), r is the monthly interest rate (annual rate ÷ 12 ÷ 100), and n is the total number of payments (years × 12). This formula assumes fixed-rate, fully amortising repayments with equal monthly installments.
How interest accumulates
Each monthly payment covers both interest and principal. In early payments, most of the payment goes toward interest. Over time, as the principal decreases, more of each payment goes toward principal. For a $25,000 loan at 6.5% over 5 years: month 1 interest = $25,000 × 6.5% ÷ 12 = $135.42. The remaining $353.73 of the $489.15 payment reduces the principal.
Total cost of borrowing
The total cost equals the monthly payment multiplied by the number of payments. Total interest is the total cost minus the original loan amount. A longer term reduces monthly payments but increases total interest paid. For example, a $25,000 loan at 6.5%: over 3 years costs $2,575 in interest; over 5 years costs $4,349 in interest; over 7 years costs $6,191 in interest.
APR vs interest rate
The interest rate is the cost of borrowing the principal. APR (Annual Percentage Rate) includes the interest rate plus any mandatory fees, giving a more complete picture of the cost. For loans with no fees, APR equals the interest rate. This calculator uses a simple interest rate — for a true APR comparison, factor in any origination fees or charges.
Frequently asked questions
How do I calculate monthly loan payments?
Use the amortisation formula: M = P × [r(1+r)^n] / [(1+r)^n − 1]. P is the loan amount, r is the monthly interest rate (annual rate ÷ 12 ÷ 100), n is the number of monthly payments. For a $20,000 loan at 5% over 4 years: r = 0.004167, n = 48, M = $460.59/month.
How much interest will I pay on a $25,000 loan?
It depends on the rate and term. At 6.5% over 5 years, total interest is approximately $4,349. At 6.5% over 3 years, total interest is approximately $2,575. A shorter term means higher monthly payments but less interest overall. Use the calculator above to model your exact scenario.
Should I choose a shorter or longer loan term?
Shorter terms have higher monthly payments but lower total interest. Longer terms have lower monthly payments but cost more overall. Choose a term where the monthly payment fits your budget while minimising total interest. A good strategy is to choose the shortest term you can afford.
Does this calculator work for car loans?
Yes. Car loans are typically fixed-rate amortising loans with terms of 3–7 years. Enter the loan amount (vehicle price minus down payment and trade-in), the APR, and the term in years. Average new car loan rates in the US range from 5–8% depending on credit score.
How does extra payment affect my loan?
Extra payments reduce the principal faster, which reduces total interest and shortens the loan term. Even small extra payments can make a significant difference over time. For example, adding $50/month to a $25,000 loan at 6.5% over 5 years saves approximately $430 in interest and pays off the loan 5 months early.
What credit score do I need for a good loan rate?
Rates vary by lender and loan type. Generally: excellent credit (750+) qualifies for the lowest rates (4–6%), good credit (700–749) gets moderate rates (6–8%), fair credit (650–699) gets higher rates (8–15%), and poor credit (below 650) may face rates above 15% or difficulty getting approved.
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