calculate-loan

01 Loan payments

Loan APR Rates: Estimate Your Monthly Payment

Calculator No. 01-3682 · Updated · Formula and assumptions shown below

Monthly payment $405.53
Total interest
$4,331.67
= Monthly payment × loan term × 12 − loan amount
Loan amount
$20,000
Input
Interest rate (APR)
8 %
Input
You enter
Loan amount ($), Interest rate (APR) (%), Loan term (years)
You get
Monthly payment ($), Total interest ($)
Rounding
2 dp

Estimate for education, not financial advice. The result follows from the numbers you enter and the formula shown. It is not a quote or an offer, and it does not include fees, taxes or insurance unless the calculator asks for them. Ask your lender for the exact figures.

Loan APR is the yearly cost of borrowing expressed as a percentage, including interest and certain fees; the rate alone does not tell you the dollar cost. Use this calculator to enter a loan amount, APR and term to estimate the monthly payment and total interest under a fixed-rate, monthly-payment model.

Formula

The calculator uses the standard level-payment formula for a fixed-rate loan with monthly payments:

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

  • P is the amount borrowed, in dollars.
  • r is the monthly interest rate, calculated as APR ÷ 1,200. For an 8% APR, r = 0.08 ÷ 12.
  • n is the number of monthly payments, calculated as years × 12.

Total interest is calculated as the rounded monthly payment multiplied by the number of payments, minus the original loan amount: interest = monthly payment × n − P. The displayed payment is rounded to cents before total interest is calculated, so the estimate reflects a payment amount stated in dollars and cents.

Worked Example

Using the calculator’s default inputs—$20,000 borrowed, 8% APR and a five-year term:

  1. Convert the APR to a monthly rate: 8 ÷ 1,200 = 0.0066667.
  2. Find the number of payments: 5 × 12 = 60.
  3. Apply the payment formula: $20,000 × 0.0066667 ÷ [1 − (1.0066667)−60] ≈ $405.53 per month.
  4. Calculate total interest using the rounded payment: $405.53 × 60 − $20,000 = $4,331.80.

Under these assumptions, the estimated monthly payment is $405.53 and total interest is $4,331.80.

Assumptions

  • The APR and payment amount stay fixed throughout the term.
  • Payments are made monthly, with the first payment one month after borrowing.
  • Interest accrues monthly at APR divided by 12.
  • The estimate excludes fees not included in the entered amount, as well as taxes, insurance, PMI and escrow.

What APR Means for a Loan

APR means annual percentage rate. It is intended to express the yearly borrowing cost in a way that can include the interest rate and certain loan charges. The interest rate is the price charged for borrowing the principal; APR may be broader because eligible fees can affect its calculation. The precise items included depend on the loan and the lender’s disclosures.

APR is not the same as the monthly rate used in the payment formula. This calculator converts an annual percentage into a monthly rate by dividing by 12, and converts percent to a decimal by dividing by 100. That is why an APR of 8% becomes 0.0066667 per month, not 8 or 0.08. The actual APR to enter should come from the lender’s loan disclosure, not from a general estimate.

How to Read the Results

The monthly payment is the scheduled amount in this simplified model. For a fully amortizing loan, each payment covers interest accrued for the period and reduces principal; early payments generally contain a larger interest share than later ones. Total interest is the estimated interest paid across all scheduled payments, not the total amount repaid. Add the original principal to total interest to get the modelled total of payments.

Term and APR affect the result in different ways. With the same principal and APR, extending the term generally lowers the monthly payment but increases the number of payments and can increase total interest. A higher APR increases the payment and interest when other inputs are unchanged. These are mathematical relationships, not a judgment about whether a loan is suitable.

Comparing APRs and Understanding Limits

APR can help readers compare disclosed borrowing costs, but comparisons are meaningful only when the loans and assumptions are alike. Check the amount financed, repayment term, payment frequency, whether the rate is fixed or variable, and which charges are included. A lower APR on a different term or loan structure does not by itself establish which option has the lower payment or total cost. Ask the lender for the full payment schedule and required disclosures for the specific offer.

This calculator assumes a fixed rate and equal monthly payments. It does not model variable-rate changes, irregular payment dates, deferred payments, balloon payments, interest-only periods, or fees paid separately. It also treats the entered APR as the rate for the payment calculation; a lender’s APR may incorporate fees in a manner that does not map exactly to this simplified amortization formula. Consequently, the calculated amount can differ from an actual scheduled payment.

Common Mistakes and Practical Checks

  • Entering a percentage as a decimal: enter 8 for 8%, not 0.08.
  • Confusing APR with a monthly rate: enter the annual APR; the formula converts it.
  • Ignoring the term: APR alone is not enough to calculate a payment. The principal and length of repayment matter too.
  • Comparing payments without comparing total cost: a longer term can reduce each payment while increasing the count of payments and interest.
  • Expecting exact lender figures: rounding, fee treatment, timing and contract terms may change the disclosed payment or total.

For an estimate based on a real offer, use the amount and APR shown in the lender’s disclosure and the actual scheduled term. If charges are financed into the amount borrowed, include them in the principal only when that matches the lender’s figures; do not add them again if already included.

Frequently Asked Questions

What is a loan APR rate?
APR is the annual percentage rate: a yearly measure of borrowing cost that can include interest and certain fees. The loan disclosure explains how the APR applies to a particular offer.

Is APR the same as the interest rate?
No. The interest rate applies to the principal, while APR can also reflect certain charges. Their relationship and included charges depend on the loan details.

How do I calculate a monthly payment from APR?
Convert APR to a monthly decimal rate by dividing it by 1,200, convert the term to months, and use the fixed-payment formula shown above. This estimate assumes equal monthly payments and a fixed rate.

Does a longer loan term lower the payment?
For the same principal and fixed APR in this model, more monthly payments generally mean a lower payment per month. The longer schedule can also mean more total interest.

Why does my lender’s payment differ from this estimate?
The lender may use different timing, rounding, fee treatment, rate structure or payment terms. Check the disclosed schedule and ask the lender to explain any difference. This result is an estimate, and the lender’s disclosure gives the exact figures.

Related

Formula used
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

Each line is one input (in, sel, list) or one result (out: label, unit, formula, decimals). How the calculators work

Method: the standard loan formula for this calculation, fixed rate and monthly compounding unless stated, rounded as each result states. Not financial advice; no lender, rate or product is recommended. See formulas and assumptions, the disclaimer or report an error.

More in this section

The whole Loan payments section →