Calculate Loan Payoff Amount: Formula and Example

This calculator estimates the total of the scheduled monthly payments on a fixed-rate loan, including the interest those payments add over the term. Enter the original loan amount, annual APR, and term in years to see the monthly payment and estimated total interest; this is not a lender’s payoff quote for a loan you already have.

Formula

The calculator uses the standard fixed-payment loan formula. First it calculates the monthly payment, rounds that payment to cents, then totals the payments and subtracts the amount borrowed to estimate interest:

• Monthly payment: M = round(P × r ÷ [1 − (1 + r)⁻ⁿ], 2)
• Total paid: M × n
• Total interest: (M × n) − P

Here, P is the loan amount in dollars; APR is the annual percentage rate entered as a percent; r is the monthly rate, APR ÷ 1,200; n is the number of monthly payments, years × 12; and M is the monthly payment in dollars. Because the payment is rounded to cents before total interest is calculated, small rounding differences from an unrounded formula or a lender’s schedule can occur.

Worked Example

Using the calculator’s defaults—$20,000, 8% APR, and five years:

1. Convert the annual rate to a monthly decimal: r = 8 ÷ 1,200 = 0.0066667.
2. Convert the term to payments: n = 5 × 12 = 60.
3. Apply the payment formula: M = round(20,000 × 0.0066667 ÷ [1 − (1.0066667)⁻⁶⁰], 2) = $405.53 per month.
4. Multiply the rounded payment by the number of months: $405.53 × 60 = $24,331.80 total paid.
5. Subtract the principal: $24,331.80 − $20,000 = $4,331.80 estimated total interest.

Assumptions

• The interest rate stays fixed for the entire term.
• Payments are equal monthly payments, made at the end of each monthly period.
• Interest is compounded monthly using APR ÷ 12.
• The estimate excludes fees, taxes, insurance, PMI, escrow, and any other charges because none are calculator inputs.

What a Loan Payoff Amount Means

“Payoff amount” can mean two related but different things. For a new or hypothetical loan, it can mean the total scheduled payments required to repay the loan over its full term. This calculator estimates that amount by adding the principal and modeled interest. For an existing loan, a payoff quote is the amount required to close the account on a particular date. It normally depends on the actual remaining principal, interest accumulated since the latest payment, and any applicable account-specific charges or credits.

That difference matters: the calculator starts with the original principal and assumes the full term is still ahead. It does not know how many payments you have made, whether payments were late or extra, the lender’s daily interest method, or the date a final payment will arrive. To settle an existing loan, request a dated payoff figure and payment instructions from the lender or servicer.

How to Use and Read the Estimate

Enter the principal actually borrowed, not necessarily the purchase price or the amount you expect to receive after deductions. Use the APR supplied for the loan and enter the term in years. APR is entered as a percentage: for example, enter 8 for 8%, not 0.08. The calculator accepts a minimum APR of 0.01% because the payment formula divides by the rate.

The first output is the estimated monthly payment. The second is estimated interest over the entire schedule, not the total payoff figure by itself. Add the loan amount to total interest to get the estimated total paid. With the defaults, that sum is $20,000 + $4,331.80 = $24,331.80.

These outputs describe a fully amortizing loan: each scheduled payment covers that month’s interest, and the remaining amount reduces principal. Early payments generally contain a larger interest portion than later payments under this fixed-rate model, while the total monthly payment stays level. The exact allocation follows the amortization schedule and payment dates.

Costs, Extra Payments, and Limits

Changing the APR or term changes the estimate. A longer term spreads repayment over more months and can increase total interest even when the monthly payment is lower. A different APR also changes both the payment and the amount of interest accrued. Use the figures in the lender’s loan disclosure or account information; this page does not supply or predict rates, fees, or qualification terms.

Extra principal payments can change an actual loan’s balance and future interest, but this calculator does not model them. Nor does it model variable rates, skipped or irregular payments, payment changes, interest-only periods, balloon payments, fees added to principal, or a different compounding convention. If any of those apply, the result may diverge materially from the account’s schedule. A lender’s payoff quote is also date-sensitive: interest can accrue between the quote date and the date funds are received.

A common misconception is that the outstanding balance is always the payoff amount. The balance shown on a statement may be calculated as of a prior date; a payoff figure may account for interest accruing after that date and other contract-specific items. Ask how long the quote is valid and whether it includes all amounts needed to close the loan.

Frequently Asked Questions

How do I calculate the total payoff on a loan?
For a fully amortizing fixed-rate loan, calculate the monthly payment, multiply it by the number of monthly payments, and add any charges that apply. This calculator estimates scheduled payments and interest but has no fee inputs.

Is total interest the same as the payoff amount?
No. Interest is only the cost above principal in this estimate. The estimated total paid equals principal plus interest; a dated payoff quote for an existing loan is a separate lender-provided figure.

Can I use this calculator for my current loan balance?
Not directly. It assumes the entered amount is the original principal and that the entire stated term remains. For a current payoff, get a dated quote from the lender or servicer.

Does the estimate include fees or early payoff charges?
No. Fees, taxes, insurance, escrow, and any early-payment or account-specific charges are not included. Check the loan documents or request a payoff statement for applicable amounts.

Why can my lender’s total differ from this result?
The lender may use actual payment dates, a different interest calculation, an adjusted final payment, prior extra or late payments, or charges not modeled here. The calculator also rounds monthly payments to cents.

This result is an estimate for educational purposes, and the lender’s disclosure gives the exact figures.

Related

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in p | Loan amount | $ | 20000 | 1 | 100000000
in apr | Interest rate (APR) | % | 8 | 0.01 | 100
in yrs | Loan term | years | 5 | 0.0833 | 50
out pmt | Monthly payment | $ | round(p * (apr / 1200) / (1 - (1 + apr / 1200) ^ -(yrs * 12)), 2) | 2
out int | Total interest | $ | pmt * yrs * 12 - p | 2