Loan Payment Calculator: Monthly Payment and Total Interest

This loan payment calculator estimates the fixed monthly payment and total interest for a fully amortizing loan. Enter the amount borrowed, annual percentage rate (APR), and term in years to see the estimated payment and the interest paid over the full term.

Formula

The calculator uses the standard fixed-payment amortization formula. It converts the annual APR to a monthly rate, then calculates the payment that pays down principal and interest over the selected number of monthly payments:

Monthly payment = P × r ÷ [1 − (1 + r)⁻ⁿ]

• P is the starting loan principal, in dollars.
• r is the monthly interest rate as a decimal: APR ÷ 1,200. For an 8% APR, r = 0.08 ÷ 12.
• n is the number of monthly payments: loan term in years × 12.

Total interest is calculated as the rounded monthly payment multiplied by the number of payments, minus the original principal: total interest = monthly payment × n − P. The monthly payment is rounded to cents before total interest is calculated, so the displayed estimate follows the same payment-rounding convention.

Worked Example

Using the calculator’s default inputs—$20,000 principal, 8% APR, and a five-year term—the calculation has 60 monthly payments and a monthly rate of 0.08 ÷ 12 = 0.0066667.

1. Substitute into the payment formula: $20,000 × 0.0066667 ÷ [1 − (1.0066667)⁻⁶⁰].
2. The unrounded result is about $405.527, so the monthly payment rounded to cents is $405.53.
3. Multiply the rounded payment by 60: $405.53 × 60 = $24,331.80.
4. Subtract the principal: $24,331.80 − $20,000 = $4,331.80 total interest.

These figures are estimates based on the formula and the stated assumptions. A lender may calculate actual scheduled payments using its own payment dates, rounding, and loan terms.

Assumptions

• The APR is fixed for the full repayment period.
• Payments are equal, made monthly, and begin one month after the loan starts.
• Interest compounds monthly at APR ÷ 12.
• The calculation excludes fees, taxes, insurance, PMI, escrow, and any charges not entered as loan principal.

When to Use a Loan Payment Estimate

Use the estimate to understand how principal, APR, and repayment time affect a standard installment loan’s payment. It can help you compare hypothetical loan structures on consistent assumptions or check the arithmetic in a quoted payment. Enter the actual amount, APR, and term shown in the lender’s documents for a closer estimate; the 8% default is only an example, not a statement about available rates.

The calculation applies to loans repaid through regular, level monthly payments that cover interest and reduce principal. It is not a universal formula for every debt. Credit cards, variable-rate loans, interest-only periods, loans with irregular payment schedules, and loans with balloon payments can behave differently. For those, the payment or balance may change according to terms that this calculator does not model.

How to Read the Results

Monthly payment is the estimated scheduled amount for principal and interest under the assumptions above. Total interest is the estimated interest paid over all scheduled payments, not the total amount repaid. To estimate total principal plus interest, add the original loan amount to the displayed interest. With the default values, that is $20,000 + $4,331.80 = $24,331.80.

A longer term generally spreads repayment across more payments and, with the same principal and APR, results in more total interest. A higher APR generally raises both the monthly payment and the total interest for the same loan amount and term. These are mathematical effects, not a recommendation about which loan structure to choose.

Common Errors and Limits

• Entering a percentage as a decimal: Enter 8 for 8% APR, not 0.08. The calculator converts the annual percentage to a monthly decimal itself.
• Mixing annual and monthly terms: The term input is in years; the formula multiplies it by 12 to get the number of payments.
• Leaving out costs: If a fee is financed and added to the loan balance, include it in the principal only if that matches the amount actually borrowed. Other costs are not included automatically.
• Expecting the final payment to match exactly: Real payment schedules can have rounding adjustments, different first-payment timing, or a final payment that differs slightly.

This fixed-rate formula assumes the APR can be treated as a monthly rate divided by 12. It does not model a changing rate, extra payments, skipped payments, late charges, payment holidays, or fees. If extra payments are made, the balance and total interest may differ from this estimate.

Frequently Asked Questions

How is a monthly loan payment calculated?
The standard amortization formula uses the principal, monthly interest rate, and total number of monthly payments to find a level payment that repays the loan over its term. This calculator converts APR to a monthly rate and the term in years to months.

Does APR mean the monthly interest rate?
No. APR is entered as a yearly percentage. For this estimate, the monthly rate is APR divided by 12, then expressed as a decimal. The calculator does not separately model fees that might affect a lender’s APR calculation.

Does the payment include taxes or insurance?
No. It estimates principal and interest only. Taxes, insurance, PMI, escrow, and other charges are not included unless they are part of the principal amount entered.

Why does a longer loan term usually increase total interest?
With the same principal and APR, a longer term means more monthly payments. Although the scheduled payment is spread across more time, interest continues to accrue while a balance remains, so the total interest calculated is generally higher.

Can I use this calculator for a variable-rate loan?
Not as a complete estimate. The formula assumes the APR stays fixed throughout repayment. A variable rate can change the payment or repayment timeline, and this calculator does not forecast those changes.

The result is an estimate, and the lender’s disclosure gives the exact figures.

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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 | $ | p * (apr / 1200) / (1 - (1 + apr / 1200) ^ -(yrs * 12)) | 2
out int | Total interest | $ | pmt * yrs * 12 - p | 2