Loan Payment Calculator: Monthly Payment, Total Interest and Cost

This calculator works out the level monthly payment on a fixed-rate loan from the amount, the APR and the term. You also get the total of all payments and how much of that is interest, so two loan offers can be compared on the same basis.

Formula

M = P × r ÷ (1 − (1 + r)⁻ⁿ), where r = APR ÷ 12 ÷ 100 is the monthly rate and n the number of monthly payments.

• P: the amount borrowed
• APR: the yearly interest rate in percent
• n = years × 12
• Total of payments = M × n; total interest = M × n − P

Worked Example

$20,000 borrowed at 8% APR over 5 years.

1. r = 8 ÷ 12 ÷ 100 = 0.006667 and n = 5 × 12 = 60
2. (1 + r)⁻⁶⁰ = 0.6712
3. M = 20,000 × 0.006667 ÷ (1 − 0.6712) = $405.53
4. Total of payments = 405.53 × 60 = $24,331.80
5. Total interest = 24,331.80 − 20,000 = $4,331.80

Assumptions

• The payment is rounded to the cent and totals use the rounded payment; a lender’s final payment can differ by a few cents.
• Fixed interest rate for the whole term; payments of equal size at the end of each month.
• Interest compounds monthly at APR ÷ 12.
• No fees, taxes or insurance unless the calculator has a field for them.

How to read the result

The payment is the same every month; early payments are mostly interest and later ones mostly principal (see the amortization schedule, which also rounds each month’s interest to the cent, so its total can differ from payment × months by a few cents). Total interest is the price of borrowing for this term; a shorter term raises the payment and lowers the total interest.

Limits and common mistakes

• Enter the APR, not a monthly or “flat” rate.
• A lender rounds each payment to the cent, so its figure can differ by a cent or two.
• Fees, insurance and taxes change the real monthly cost; ask your lender for its disclosure.

Frequently Asked Questions

What is the monthly payment on $20,000 at 8% for 5 years?

About $405.53, for a total of about $24,331.80 and $4,331.80 of interest.

Does a longer term save money?

It lowers the monthly payment but raises the total interest, because the balance is outstanding for longer.

What if the rate is 0%?

The payment is simply the amount divided by the number of months. Enter a small rate such as 0.01% here, or divide by hand.

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 tot | Total of payments | $ | pmt * yrs * 12 | 2
out int | Total interest | $ | tot - p | 2