Loan Interest Calculator: Monthly Payment and Total Interest

A loan interest calculator estimates the monthly payment and total interest for a fixed-rate, level-payment loan. Enter the amount borrowed, annual interest rate, and term; the results show the scheduled payment and the interest paid over the full term, assuming payments are made monthly.

Formula

The calculator uses the standard amortizing-loan payment formula. It first calculates a level monthly payment, then subtracts the amount borrowed from the sum of all scheduled payments to estimate total interest.

• Monthly payment: M = P × r / [1 − (1 + r)⁻ⁿ]
• Total interest: I = M × n − P
• Monthly rate: r = APR / 1,200

P is the principal, or amount borrowed, in dollars. APR is the annual percentage rate entered as a percentage, such as 8 for 8%. r is the monthly rate as a decimal. n is the term in months, calculated as years × 12. M is the monthly payment in dollars, and I is total interest in dollars. The displayed payment is rounded to the nearest cent; total interest uses that rounded payment multiplied by the number of payments.

Worked Example

Using the calculator’s default values—$20,000 principal, 8% APR, and a 5-year term:

1. Convert the annual rate to a monthly decimal: r = 8 / 1,200 = 0.0066667.
2. Convert the term to months: n = 5 × 12 = 60.
3. Calculate the monthly payment: M = 20,000 × 0.0066667 / [1 − (1 + 0.0066667)⁻⁶⁰] = $405.53, rounded to cents.
4. Calculate total interest using the rounded payment: I = $405.53 × 60 − $20,000 = $4,331.80.

The estimate is therefore a monthly payment of $405.53 and total interest of $4,331.80 across 60 payments.

Assumptions

• The interest rate stays fixed for the entire term.
• Payments are equal, made monthly, and occur at the end of each payment period.
• Interest is modelled monthly at APR divided by 12.
• The calculation excludes fees, taxes, insurance, PMI, escrow, late charges, and other costs because they are not inputs.

When to Use a Loan Interest Calculator

Use the estimate to understand how the principal, rate, and repayment term relate to a scheduled payment and the total interest implied by those inputs. It can help you check a quoted payment’s basic arithmetic or compare hypothetical combinations of loan amount, rate, and term. For an actual offer, enter the figures from the lender’s disclosure rather than relying on a general example. Rates and fees vary by offer and are not supplied by this calculator.

The two outputs answer different questions. The monthly payment is the modelled amount due each month for principal and interest. Total interest is the cumulative financing cost in this simplified schedule, not the total amount repaid. Adding the principal to the interest gives the scheduled sum of payments: in the example, $20,000 + $4,331.80 = $24,331.80.

How the Results Change

For the same principal and rate, a longer term generally lowers the calculated monthly payment because repayment is spread over more months. It also means more payments are made, so total interest is generally higher. A shorter term usually raises each payment while reducing the number of periods over which interest accrues. These are mathematical effects of the inputs, not a recommendation about which term to choose.

For the same principal and term, a higher entered APR increases the payment and the total interest in this formula. A larger principal also increases both results. Real loan contracts can have payment schedules or charges that this simple calculation does not capture, so the calculator is useful for estimates, not as a replacement for the lender’s schedule.

Common Calculation Issues and Limits

• Entering a whole percentage incorrectly: Type 8 for 8%, not 0.08. The formula divides the percentage by 1,200 to convert it to a monthly decimal.
• Mixing years and months: The term field is in years. A five-year term becomes 60 monthly payments; do not enter 60 in the years field.
• Comparing different loan structures: The formula assumes a fixed rate and equal monthly payments. Variable rates, interest-only periods, balloon payments, irregular schedules, and changing payment amounts need a different model.
• Expecting every cost in the payment: This result covers modeled principal and interest only. Taxes, insurance, fees, and other contract charges may change the amount due or total cost.
• Rounding differences: The payment is rounded to cents, and the interest total uses that rounded payment. A lender’s schedule may handle the final payment or daily interest differently, producing a small difference.

The formula also treats APR as a rate divided into twelve equal monthly periods. A disclosed APR may reflect costs or conventions that do not match a simple nominal-rate calculation exactly. For precise contract figures, use the lender’s payment schedule and disclosure.

Frequently Asked Questions

How do I calculate interest on a loan?
For a fixed-rate loan with equal monthly payments, calculate the payment using principal, monthly rate, and number of payments. Multiply the rounded payment by the number of payments, then subtract the principal to estimate total interest.

Is APR the same as the monthly interest rate?
No. APR is entered here as an annual percentage. This calculator converts it to a monthly decimal by dividing by 1,200. Contract disclosures can define or incorporate costs in ways a basic calculation does not model.

Does the monthly payment include fees or insurance?
No. The result estimates principal and interest only. Fees, taxes, insurance, PMI, and escrow are not included unless separately represented in a different calculation.

Why might my lender’s payment differ?
The lender may use different timing, rounding, fees, rate conventions, payment dates, or a loan structure other than fixed monthly amortization. Check the official disclosure for the contract’s figures.

Does paying extra reduce the total interest?
Extra principal payments can change the balance and interest schedule, but this calculator assumes only the regular level payment. It does not model extra payments or their timing.

This 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