Loan Calculator
Find the monthly payment, total interest and full repayment schedule for any fixed-rate loan — personal, car, student or business.
How to use this calculator
- 1Enter how much you are borrowing and the annual interest rate the lender quoted.
- 2Set the term in years — decimals are fine, so a 30-month loan is 2.5.
- 3Add any arrangement fee to see the true cost of borrowing rather than just the interest.
- 4Try an extra monthly payment to see how much interest it removes.
How the calculation works
A = P × i / (1 − (1 + i)⁻ⁿ)- A
- Payment per period (usually per month)
- P
- Principal — the amount borrowed
- i
- Interest rate per period (annual rate ÷ 12)
- n
- Total number of payments
Known as the annuity or EMI formula. It produces a constant payment; what changes over time is the split between interest and principal.
When the rate is zero the formula is undefined, so the calculator falls back to P ÷ n — which is the correct answer for an interest-free loan.
Worked example
A $25,000 car loan over 5 years at 9.5%
- 1.The monthly rate is 9.5% ÷ 12 = 0.791666…% and there are 5 × 12 = 60 payments.
- 2.A = 25,000 × 0.00791666 ÷ (1 − 1.00791666⁻⁶⁰) = $525.05.
- 3.Over 60 months you repay $31,503.00, so the interest is $6,503.00 — about 26% of what you borrowed.
Result: $525.05 a month, $6,503.00 total interest
What a loan actually is
A loan is an agreement to receive a lump sum of money now in exchange for repaying a larger amount later. The difference between what you borrow (the principal) and what you eventually hand back is interest — the price the lender charges for letting you use its money instead of your own, and for the risk that you might not pay it back.
Every fixed-rate instalment loan, whatever it is used for, works the same way underneath: a lender advances the principal, a rate is applied to whatever balance remains, and a level payment is calculated so the debt reaches exactly zero at the end of the term. What changes between a personal loan, a car loan and a business loan is mostly the purpose, the paperwork and how the lender manages its risk — not the underlying arithmetic.
Secured and unsecured borrowing
Loans split into two broad families depending on what backs them.
- Secured loans — are tied to an asset — a car, a home, savings held with the lender — that the lender can seize and sell if payments stop. Because that collateral reduces the lender’s risk, secured loans typically carry lower rates than unsecured borrowing of the same size.
- Unsecured loans — rely on nothing but your promise to repay and your credit history. Most general-purpose personal loans fall into this category, which is why the rate offered leans heavily on your credit profile rather than on any specific asset.
What actually drives the true cost
Four figures determine what a loan really costs, and it is easy to compare only one of them and miss the rest.
- Interest rate — the annual cost of the outstanding balance, usually applied monthly at one-twelfth of the yearly rate.
- APR — a standardised figure that folds compulsory fees into the rate, which makes it the fairer number for comparing two different lenders’ offers side by side.
- Term — how many months the balance is spread over. A longer term lowers the monthly payment but keeps more of the balance outstanding for longer, which usually raises the total interest paid.
- Fees — arrangement, origination or administration charges taken up front. A loan with a slightly lower rate but a large origination fee can end up costing more than one with a higher rate and no fee.
Cutting the cost of borrowing
A handful of habits reliably lower what a loan costs, in roughly the order they are worth doing.
- 1Compare more than one lender — rates for the same borrower can differ meaningfully between institutions, and checking your own rate rarely affects your credit score if the lender uses a soft check for the initial quote.
- 2Borrow over the shortest term you can comfortably afford — the monthly payment is higher, but far less total interest accrues because the balance is outstanding for less time.
- 3Improve your credit profile before applying — paying down existing balances and correcting errors on a credit report can move you into a better rate band before you ever submit an application.
- 4Make extra payments when you can — on most instalment loans, anything paid above the scheduled amount reduces the principal directly and stops accruing interest for the rest of the term.
- 5Pay fees up front rather than financing them — rolling an origination fee into the loan means paying interest on the fee itself for the whole term.
What this assumes, and where it stops
Assumptions
- The rate is fixed for the whole term and interest is compounded monthly on the outstanding balance.
- Payments are made in full and on time, one month apart, starting a month after drawdown.
- Any fee entered is paid up front rather than added to the loan.
- Extra payments reduce the principal immediately with no early-repayment penalty.
Limitations
- Does not model variable rates, payment holidays, or interest-only periods.
- Early repayment charges are common on fixed-rate loans and are not included.
- Where a lender quotes an APR that bundles fees into the rate, entering that APR and the fee separately will double-count the fee.
- Balloon payments and residual values on car finance (PCP deals) are not modelled.
Common questions
Is this the same as an EMI calculator?
Yes. "EMI" (equated monthly instalment) is the term used across South Asia for exactly this calculation — a level monthly payment on a reducing balance. The formula is identical.
Why does a longer term cost so much more?
Interest is charged on the balance you still owe, so stretching repayment means the balance stays high for longer. Doubling a term does not double the interest — it usually more than doubles it, while cutting the monthly payment by much less than half.
What is the difference between the interest rate and the APR?
The interest rate is what accrues on the balance. The APR is a standardised figure that also folds in compulsory fees, so it is the better number for comparing offers. This calculator uses the plain interest rate and lets you enter fees separately, which shows you where the cost actually comes from.
Sources
- Understanding loan options and terms — US Consumer Financial Protection Bureau
Formula and content last reviewed on .
Results are estimates for information only, not professional advice.
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