Loan Calculator
Calculate the monthly payment, total interest, and payoff schedule for any fixed-rate loan. Enter the amount, rate, and term.
| Year | Principal | Interest | Balance |
|---|---|---|---|
| 1 | $3,389 | $1,478 | $16,611 |
| 2 | $3,670 | $1,196 | $12,941 |
| 3 | $3,975 | $892 | $8,966 |
| 4 | $4,305 | $562 | $4,662 |
| 5 | $4,662 | $204 | $0 |
Assumes a fixed rate and equal monthly payments. Excludes fees unless included in the rate.
How to use this calculator
Enter the loan amount (the amount you borrow, not counting any fees), the annual interest rate, and the term in years. Click calculate and you'll see:
- Your fixed monthly payment
- Total interest paid over the life of the loan
- Total amount repaid (principal + interest)
- A year-by-year breakdown showing how principal, interest, and remaining balance change each year
Try adjusting the term or rate to compare scenarios. Cutting the term from 5 years to 3 years, for example, will raise the monthly payment but often saves a meaningful amount in interest.
How fixed-rate loans work
Most consumer loans — auto loans, personal loans, and many debt-consolidation loans — are fully amortizing and fixed-rate. "Fully amortizing" means each payment reduces the outstanding balance so that the loan reaches exactly zero by the final payment. "Fixed-rate" means the interest rate, and therefore the payment amount, never changes for the life of the loan.
Even though the monthly payment stays constant, what it pays for changes dramatically over time. In the early months, the balance is large, so a large fraction of each payment goes toward interest. As you make payments, the balance shrinks — and because interest is calculated on the remaining balance, less of each subsequent payment goes to interest and more goes to principal. This shift continues until the final payments, which are almost entirely principal.
This structure is why extra payments are so powerful early in a loan. If you pay an extra $100 in month one, it directly reduces the principal, which means every future payment accrues slightly less interest — and that compounds across dozens or hundreds of remaining payments.
Worked example — step by step
Suppose you borrow $20,000 at 8% annual interest for 5 years (60 payments).
- Monthly rate: 8% ÷ 12 = 0.6667%
- Monthly payment: $20,000 × [0.006667 × (1.006667)⁶⁰] ÷ [(1.006667)⁶⁰ − 1] ≈ $405.53
- Total paid over 60 months: $405.53 × 60 = $24,331.80
- Total interest: $24,331.80 − $20,000 = $4,331.80
In month 1: interest = $20,000 × 0.6667% = $133.33; principal = $405.53 − $133.33 = $272.20; new balance = $19,727.80.
In month 60: interest ≈ $2.69; principal ≈ $402.84; balance = $0.
Now compare: the same $20,000 at 8% over 7 years (84 months) gives a lower payment of about $311/month, but total interest climbs to roughly $6,100 — nearly $1,800 more for the convenience of a smaller monthly obligation.
How to interpret your result
The monthly payment tells you whether the loan fits your budget. A common guideline is to keep total debt payments (including housing) below 43% of gross monthly income — the threshold many lenders use when evaluating applications.
The total interest figure is what the loan actually costs you beyond the amount borrowed. Comparing this number across loan offers with different rates and terms is often more revealing than comparing monthly payments alone. A loan with a lower payment but a higher total interest cost is usually the more expensive choice.
The year-by-year table shows your principal balance at the end of each year. If you're considering refinancing or selling an asset (like a car) in the future, this tells you roughly what you'll still owe.
Common mistakes to avoid
- Focusing only on the monthly payment. A longer term lowers your payment but increases total interest. Always check the total cost of the loan, not just what fits your monthly budget.
- Ignoring fees when comparing loans. Two loans with the same stated interest rate can have very different costs if one charges an origination fee. Use APR — which factors in fees — when comparing offers.
- Assuming a lower rate always means a better deal. A lower rate with a significantly longer term can cost more in total interest than a slightly higher rate with a shorter term.
- Not checking for prepayment penalties. Some loans charge a fee if you pay them off early. Before planning extra payments, confirm your loan agreement allows it without penalty.
- Entering APR instead of the interest rate (or vice versa). If your lender quotes APR and you enter that, the result is slightly different from using the base rate. For this calculator, use the stated interest rate for a clean amortization projection, and use APR only for cost comparisons across loans.
The formula
Payment = P × [ r(1 + r)n ] ÷ [ (1 + r)n − 1 ]
Where: P = principal (loan amount), r = monthly interest rate (annual rate ÷ 12), n = total number of monthly payments (years × 12).
Interest for any period = remaining balance × r. Principal for any period = Payment − Interest.
How we calculate this
Monthly payment is computed using the standard fixed-rate amortization formula: Payment = P × [r(1+r)ⁿ] ÷ [(1+r)ⁿ − 1], where P is the principal, r is the monthly interest rate (annual rate ÷ 12), and n is the total number of monthly payments. Total interest is the sum of all payments minus the original principal. The year-by-year schedule applies this formula to each payment period to split principal and interest and track the declining balance.
Sources
Frequently asked questions
How is a loan payment calculated?
A fixed-rate loan uses an amortization formula: each equal monthly payment covers the interest on the remaining balance plus some principal, so the loan is fully paid off by the end of the term. The formula is Payment = P × [r(1+r)ⁿ] / [(1+r)ⁿ − 1], where P is the principal, r is the monthly interest rate, and n is the total number of payments.
What affects my monthly payment?
Three things drive your payment: the loan amount (principal), the interest rate, and the repayment term. A larger principal or a higher rate raises the payment. A longer term spreads payments out, lowering each one — but you pay interest for more months, so the total cost rises.
Does a longer term cost more overall?
Yes, almost always. Stretching a loan over more years lowers each monthly payment but means you pay interest for a longer time. On a $20,000 loan at 8%, a 5-year term costs roughly $4,300 in interest; a 7-year term runs closer to $6,200 — about $1,900 more for the same borrowed amount.
What is APR?
APR (annual percentage rate) is the yearly cost of the loan expressed as a percentage, and it includes certain fees such as origination charges on top of the interest rate. Because it captures more of the true cost, APR is the best single number to compare across different loan offers.
What is amortization?
Amortization is the process of paying down a loan through regular scheduled payments. In a fully amortizing loan, each payment is the same dollar amount, but the portion going to interest decreases each month as the balance falls, while the portion going to principal increases. By the final payment, the balance reaches exactly zero.
Can I pay off a loan early?
Most consumer loans allow early payoff without penalty, though you should confirm this with your lender. Paying extra reduces the principal balance, which cuts the interest that accrues in subsequent months. Even one extra payment per year can shorten the term noticeably.
What is the difference between simple interest and compound interest on a loan?
Most installment loans (auto, personal, student) use simple interest — interest accrues only on the outstanding principal balance. Credit cards typically compound interest daily on the balance. Simple-interest amortizing loans are generally more predictable because the payment amount is fixed and the payoff date is known from the start.
How does a year-by-year breakdown help me?
The annual schedule shows how much of each year's payments goes to principal versus interest, and the balance remaining at year-end. Early years are heavily weighted toward interest; later years shift toward principal. This helps you see exactly when you cross key milestones — like paying off more than half the principal.