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CALCULATOR · Finance

Loan Calculator

Fixed-rate loan payment, total interest and payoff time — with extra-payment savings.

Show formula
M = P·i / (1−(1+i)^−n)

Method reviewed:Standard amortization: M = P·i / (1 − (1 + i)^−n) · reviewed August 2026

Inputs

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Result

Your result appears here

Enter Loan amount and the result fills in as you type.

How it works

  1. Enter loan amount, annual rate and term in months.
  2. Optionally add an extra monthly payment.
  3. Read payment, totals, payoff time and the yearly schedule.

Frequently asked questions

How do extra payments help?

Extra principal shortens the schedule, cutting months of interest. The result shows the exact payoff time and interest saved versus the normal plan.

Does the term include taxes or fees?

No — the engine models principal and interest only.

How much of my first payment is interest?

One month’s interest on the whole balance: the amount borrowed × the annual rate ÷ 12. For 20,000 at 6% that is 100.00, so 286.66 of the 386.66 payment reduces the debt. The interest share falls with every payment after that.

How much can I borrow for a given monthly payment?

Run the formula backwards: P = M × (1 − (1 + r)^−n) ÷ r. At 6% over 5 years, a payment of 400 a month supports a loan of about 20,690.

Is a shorter loan term always better?

It always costs less interest when the rate is above zero, but the payment is higher. The shortest term whose payment fits comfortably in your budget is usually the cheapest safe choice.

Do extra payments lower my monthly payment?

Not on a standard loan. The instalment stays the same and the loan ends sooner, which is where the interest saving comes from. Some lenders will lower the payment instead and keep the original end date; that saves less interest.

How the monthly payment is calculated

A standard personal or car loan is repaid in equal monthly instalments. Each one covers the interest charged that month and repays part of the balance, and the amount is set so that the last instalment clears the debt exactly:

M = P × r ÷ (1 − (1 + r)^−n)

P is the amount borrowed, r the monthly interest rate (the annual rate divided by 12, so 6% a year is 0.005 a month) and n the number of monthly payments. For 20,000 at 6% over 5 years, r = 0.005 and n = 60, which gives M = 386.66.

Because interest is charged on the balance still owed, the split inside that fixed payment changes every month. In the first year you pay 1,103.81 in interest and repay 3,536.06 of the loan; in the fifth year the interest is down to 147.34.

How the term changes the cost

The same 20,000 at 6%, repaid over different terms:

20,000 at 6% by loan term
TermMonthly paymentTotal interestTotal repaid
3 years (36 payments)608.441,903.7921,903.79
4 years (48 payments)469.702,545.6322,545.63
5 years (60 payments)386.663,199.3623,199.36
6 years (72 payments)331.463,864.9623,864.96
7 years (84 payments)292.174,542.3724,542.37

Stretching the loan from 5 to 7 years lowers the payment by 94.49 a month and adds 1,343.01 of interest. A smaller payment is not a cheaper loan.

Paying extra each month

Money paid on top of the instalment goes straight to the balance, so the instalment stays the same and the schedule gets shorter. On the same 20,000 at 6% over 5 years, 50 extra a month clears the loan in 53 months instead of 60 and saves 429.04 of interest; 200 extra clears it in 38 months and saves 1,217.24.

Extra payments save the most when they start early, while the balance is highest. Before you pay extra, check that your lender puts it towards the principal and does not charge an early-repayment fee that would cancel the saving.

Common loan calculation mistakes

  • Entering years in the months field. A 5-year loan is 60 months. Typed as 5, it becomes a five-month loan with a payment of 4,060.20.
  • Using the annual rate as the monthly rate. Worked by hand, 6% a year must become 0.005 a month. Using 0.06 gives a payment of 1,237.51 instead of 386.66.
  • Confusing the interest rate with the APR. The payment comes from the loan’s interest rate. The APR also counts fees, which makes it the better figure for comparing offers but the wrong one to put into the formula.
  • Forgetting fees added to the loan. An arrangement fee added to the balance is borrowed too, and it is charged interest for the whole term.

Examples

A 20,000 loan at 6% over 5 years
386.66 a month. Over 60 payments you repay 23,199.36, of which 3,199.36 is interest.
The same loan with 100 extra each month
Paid off in 47 months instead of 60, with 2,444.38 of interest — 754.98 less.

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