Loan Calculator
A loan calculator works out the fixed monthly payment on a loan from the amount borrowed, the annual interest rate and the term, using the standard amortization formula. Enter your figures below to see the monthly payment, the total interest you will pay and a full month-by-month amortization schedule.
Loan Calculator
Amortization schedule
| Month | Payment | Principal | Interest | Balance |
|---|
How loan repayments work
A loan with a fixed interest rate is repaid in equal monthly instalments over its term. Each payment covers the interest due on the current balance, and the rest reduces the principal. Because the balance shrinks every month, the interest portion falls and the principal portion grows — this is called amortization.
The monthly payment formula
The fixed payment is calculated as M = P × r / (1 − (1 + r)−n), where P is the loan amount, r is the monthly interest rate (the annual rate divided by 12 and by 100), and n is the total number of monthly payments (years × 12).
Worked example
For a loan of 20,000 at 6% annual interest over 5 years: r = 0.005, n = 60, giving a monthly payment of about 386.66, a total of 23,199.36 paid and 3,199.36 in interest.
Tip
Making small extra payments early reduces the balance sooner, which can save a large amount of interest over the life of the loan.
Frequently asked questions
How is a monthly loan payment calculated?
The payment uses the amortization formula: P × r / (1 − (1 + r)^−n), where P is the loan amount, r the monthly interest rate (annual rate ÷ 12 ÷ 100) and n the number of monthly payments.
What is an amortization schedule?
It is a month-by-month table showing how each payment splits between interest and principal, and how the remaining balance falls to zero over the term.
Does paying extra reduce the total interest?
Yes. Paying more than the required payment reduces the balance faster, so less interest accrues and the loan is paid off sooner.
What is the difference between interest rate and APR?
The interest rate is the cost of borrowing the principal, while the APR also includes certain fees, giving a fuller picture of the yearly cost.
Why is more of my early payment interest?
Interest is charged on the outstanding balance, which is highest at the start, so early payments are mostly interest and later ones mostly principal.