Loan Payment Calculator
Enter loan details to calculate your monthly payment, total interest and full payoff schedule
Payment vs Term Scenarios
Complete Loan Summary
Amortisation Schedule
| Period | Payment | Principal | Interest | Balance |
|---|
How Loan Payments Work
Understanding amortisation, principal vs interest and how payments change over time
When you take out a loan, you agree to repay the borrowed amount (the principal) plus a charge for borrowing it (the interest) through regular monthly payments. Each payment is split between interest and principal — but the split changes every month.
In early months, most of your payment goes toward interest because the outstanding balance is at its highest. As you pay down the principal, the interest charge each month falls, so more of each payment reduces the balance. By the final months, nearly your entire payment goes to principal. This is loan amortisation.
The amortisation schedule above shows exactly how each payment is split, month by month, from first to last. Use it to understand how much of your money is going to the lender vs reducing your actual debt.
Loan Payment Formula Explained
Step-by-step breakdown of how monthly payments are calculated
- 1
Convert Annual Rate to Monthly
Divide annual rate by 12 (months) and 100 (to decimal). For 6% p.a.: r = 6 ÷ 12 ÷ 100 = 0.005 per month.
- 2
Get Total Number of Payments
Multiply term in years × 12 = n. A 3-year loan has n = 36; a 30-year mortgage has n = 360 monthly payments.
- 3
Apply the Amortisation Formula
M = P × r(1+r)ⁿ / [(1+r)ⁿ − 1] ensures equal payments each month while interest is only charged on the declining outstanding balance.
- 4
Calculate Total Interest
Total paid = M × n. Total interest = (M × n) − P. This is the true cost of borrowing — often surprising on longer-term loans.
- 5
Build the Monthly Schedule
Each month: Interest = Balance × r. Principal = M − Interest. New balance = Balance − Principal. Repeat n times until balance = $0.
Loan Types Compared
Typical rates, terms and cost levels for common loan types worldwide
| Loan Type | Typical APR | Typical Term | Typical Amount | Interest Cost | Secured? |
|---|---|---|---|---|---|
| 🏠 Mortgage / Home Loan | 6%–8% | 15–30 years | $100K–$1M+ | Low rate | Yes — property |
| 🚗 Auto / Car Loan | 5%–12% | 2–7 years | $5K–$80K | Medium | Yes — vehicle |
| 🎓 Student / Education Loan | 4%–12% | 10–25 years | $5K–$150K | Medium | Usually not |
| 💼 Personal Loan | 7%–36% | 1–7 years | $1K–$50K | High | No |
| 🏢 Small Business Loan | 6%–30% | 1–10 years | $5K–$500K | High | Often |
| 🏠 Home Equity (HELOC) | 7%–12% | 5–20 years | $10K–$500K | Low–Med | Yes — home equity |
| 💳 Credit Card (revolving) | 18%–29% | Revolving | $500–$30K | Very High | No |
8 Ways to Save Money on Any Loan
Proven strategies to lower your rate, reduce total interest and become debt-free faster
Improve Your Credit Score First
Your credit score is the single biggest lever on your interest rate. Moving from "fair" (650) to "excellent" (760+) credit can cut your rate by 3–5%. On a $50,000 loan, that's thousands saved. Check for errors, pay down existing debt and avoid new credit applications 6 months before applying.
Shop at Least 3–5 Lenders
Rates vary dramatically between banks, credit unions and online lenders for identical borrower profiles. Credit unions often offer 1–2% lower rates than major banks. Multiple pre-qualification checks within 14–45 days count as one hard inquiry — shop freely within that window.
Choose the Shortest Term You Can Afford
A 3-year personal loan at 8% costs far less in total interest than the same loan over 5 years, even with a higher monthly payment. Use the scenario cards above to see the exact trade-off. If you can comfortably manage the higher payment, a shorter term is almost always better.
Make Extra Payments Whenever Possible
Any amount above the minimum goes directly to principal, reducing the base on which future interest is calculated. Even $25–50/month extra can save hundreds and cut months off the loan. Use the extra payment field above to calculate your exact savings.
Refinance When Rates Drop
If rates fall 1% or more after you take a loan, refinancing can yield meaningful savings. Factor in closing costs ($200–$2,000 typically) to ensure you break even within a reasonable period. Refinancing is most beneficial if you have significant remaining term and your credit has improved.
Switch to Bi-Weekly Payments
Making half your monthly payment every two weeks results in 26 half-payments (= 13 full payments) per year instead of 12. That one extra annual payment goes entirely to principal. On a 30-year mortgage this can cut 4–6 years off the loan term with minimal effort.
Apply Windfalls to Principal
Tax refunds, bonuses, inheritance or side income applied to loan principal reduce the balance on which all future interest is calculated. A $1,000 lump sum applied early on a 5-year loan can save $150–$300 in interest over the remaining term.
Don't Extend the Term When Refinancing
When refinancing, restarting the clock with a longer term for lower payments often increases total interest even at a lower rate. Aim to keep the remaining term the same or shorter, and take the rate reduction as the savings source rather than stretching out the timeline.
Frequently Asked Questions
Common questions about loan calculations, payments and smart borrowing