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 — and this split changes every single month.
In early months, most of your payment goes toward interest because the outstanding balance is at its highest. As you pay down principal, the interest charge falls each month, 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 see precisely how much of your money goes to the lender vs reducing your actual debt.
Loan Payment Formula Explained
Step-by-step breakdown of how monthly loan payments are calculated
- 1
Convert Annual Rate to Monthly
Divide the annual rate by 12 and by 100. 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 applies only to 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 long-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
| Loan Type | Typical APR | Typical Term | Typical Amount | Cost Level | 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 — 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 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 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 big banks. Multiple pre-qualification checks within 14–45 days count as one hard inquiry — shop freely in that window.
Choose the Shortest Term You Can Afford
A 3-year loan costs more monthly but far less in total interest vs 5 years. Use the scenario cards to see the exact trade-off. If you can comfortably manage the higher payment, a shorter term is almost always the better financial decision.
Make Extra Payments Whenever Possible
Any payment above the minimum goes directly to principal, reducing the base on which future interest is calculated. Even $25–50/month extra saves meaningfully over time. Use the extra payment field in this calculator to see your exact savings.
Refinance When Rates Drop Significantly
If market rates fall 1% or more, refinancing can yield real savings. Factor in closing costs ($200–$2,000 typically) to ensure you break even in a reasonable period. Refinancing works best with significant remaining term and improved credit since origination.
Switch to Bi-Weekly Payments
Half your monthly payment every two weeks = 26 half-payments (13 full payments) per year instead of 12. That one extra payment goes entirely to principal. On a 30-year mortgage, this can cut 4–6 years off the loan term with no noticeable lifestyle change.
Apply Windfalls to Principal
Tax refunds, bonuses or unexpected income applied to loan principal directly reduce the base on which all future interest is calculated. A $1,000 lump sum early in the loan can save $150–$400 in interest depending on rate and remaining term.
Don't Extend the Term 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, taking the rate reduction as your source of savings rather than stretching the timeline.
Frequently Asked Questions
Common questions about loan calculations, payments and smart borrowing