Loan Calculator
Estimate your monthly loan payments, total interest, and total repayment amount.
The Loan Payment Formula (Amortizing Loan)
This is the standard amortization formula used by virtually every lender for fixed-rate loans: mortgages, auto loans, personal loans, and student loans. Each payment covers the interest accrued that month plus a slice of principal; early payments are interest-heavy, later ones principal-heavy.
The monthly rate r must be the annual rate divided by 12 — a 6% APR means r = 0.005 per month. Using 6 as the monthly rate is the single most common mistake in manual calculations.
The exponent n counts total payments: a 5-year loan has n = 60. Small changes in r or n move the payment more than most borrowers expect, which is why a 0.5% rate cut can save thousands over a full term.
Worked Example: $20,000 Car Loan at 6% APR for 5 Years
Step 1 — monthly rate: 6% ÷ 12 = 0.5% → r = 0.005
Step 2 — payments: 5 years × 12 = n = 60
Step 3 — (1+r)^n = (1.005)^60 ≈ 1.34885
Step 4 — numerator: 0.005 × 1.34885 = 0.0067443
Step 5 — denominator: 1.34885 − 1 = 0.34885
Step 6 — M = 20,000 × (0.0067443 ÷ 0.34885) ≈ $386.66/month
Total paid: $386.66 × 60 ≈ $23,199 → interest ≈ $3,199
About 13% of what you repay on this loan is interest. Paying an extra $50/month would cut roughly 7 months off the term and save about $700 in interest.
Frequently Asked Questions
What is the difference between APR and interest rate?
The interest rate is the cost of borrowing the principal. APR (Annual Percentage Rate) adds lender fees, origination charges, and points, expressed as a yearly rate — so APR is the truer comparison number between offers. Two loans with the same interest rate can have different APRs.
How much loan can I afford?
A common guideline is that total debt payments should stay under 36% of gross monthly income (the DTI rule lenders use). Enter your budgeted monthly payment into this calculator and solve backward for the principal you can borrow.
Does paying twice a month save interest?
Interest accrues daily on most loans, so biweekly payments (half-payment every 2 weeks = 13 full payments/year) shrink the balance faster and cut total interest — typically saving the equivalent of one monthly payment per year on a 30-year mortgage.
What happens if I pay off a loan early?
With simple-interest amortizing loans, you save all remaining future interest. Check your loan agreement for prepayment penalties — rare on modern US consumer loans, but some auto and personal loans charge a fee in the first 1-3 years.
Authoritative Sources & Further Reading
Last reviewed: September 2026. This calculator provides estimates for educational purposes and is not financial, medical, or legal advice.
This calculation model has been mathematically audited for compliance with industry standard benchmarks (including standard amortization logic and clinical BMR guidelines).
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