calculate-loan

01 Loan payments

Loan Repayment Calculator: Monthly Payment and Interest

Calculator No. 01-6533 · 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.

This loan repayment calculator estimates your monthly payment and total interest from the amount borrowed, annual percentage rate (APR), and repayment term. Enter the figures from your loan offer to see the level monthly payment and the total paid in interest over the term.

Formula

The calculator uses the standard fixed-payment amortization formula. It first finds the monthly payment, then subtracts the original principal 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

Here, P is the principal, or amount borrowed, in dollars; APR is the annual percentage rate entered as a percentage; r is the monthly rate, calculated as APR ÷ 1,200; n is the number of monthly payments, calculated as years × 12; M is the monthly payment in dollars; and I is total interest in dollars. The displayed payment is rounded to cents. Total interest uses that rounded payment, so small differences from a lender’s schedule can occur.

Worked Example

Using the calculator’s default values—$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 + 0.0066667)−60] = approximately $405.53 per month.
  4. Calculate total interest using the rounded payment: $405.53 × 60 − $20,000 = $4,331.80.

The results are a monthly payment of $405.53 and estimated total interest of $4,331.80. Actual payment schedules may differ if the lender uses different rounding, payment dates, or included charges.

Assumptions

  • The interest rate stays fixed throughout the repayment term.
  • Payments are equal, made monthly, and occur at the end of each monthly period.
  • Interest is compounded monthly using APR divided by 12.
  • The calculation excludes fees, taxes, insurance, PMI, escrow, and other charges unless reflected in the entered amount or rate.

When to Use a Loan Repayment Estimate

This calculation is useful for understanding the basic repayment arithmetic for an installment loan with a fixed rate and equal monthly payments. It can help you interpret a quoted payment, compare the effects of changing the amount or term in a neutral way, or check how principal and interest relate across the scheduled term. The calculator does not determine whether a loan is suitable for a particular person.

Use the principal that will actually be financed, not necessarily the item’s advertised price. If charges are added to the balance, the amount financed may be higher than the amount received or purchase price. Enter the APR and term as stated in the lender’s documents; do not substitute a monthly rate into the APR field. Get the actual rate, fees, and payment schedule from the lender because they depend on the specific offer.

How to Read the Results

The monthly payment is the level amount the formula assigns to each of the scheduled payments. In a typical amortizing schedule, each payment covers interest accrued for that period and reduces principal. Earlier payments generally contain a larger interest portion than later payments because the outstanding balance declines over time.

Total interest is the estimated interest across all payments, not the total amount repaid. Add the principal to total interest to get the estimated scheduled repayment total: in the example, $20,000 + $4,331.80 = $24,331.80. This total does not include charges excluded by the assumptions. It also assumes every scheduled payment is made as planned, without extra payments, missed payments, rate changes, or a different final payment.

Common Errors and Limits

  • Mixing up APR and monthly rate: Enter an annual percentage such as 8, not 0.08 or a monthly rate. The formula converts APR to a monthly decimal by dividing by 1,200.
  • Entering the wrong term: The input is in years, while the formula converts it to months. For a term stated only in months, divide the months by 12 before entering it, recognizing that the calculator accepts years to four decimal places in its input range.
  • Expecting exact statement figures: Lenders may calculate interest using actual dates, different rounding conventions, or other contract details. A standard formula is an estimate, not a substitute for the loan’s payment schedule.
  • Applying it to a changing balance or rate: Variable rates, interest-only periods, balloon payments, irregular payments, and revolving credit do not follow this simple fixed-payment model throughout their life.

For a more detailed payoff picture, an amortization schedule shows each period’s starting balance, interest portion, principal portion, and ending balance. Extra principal payments can change how quickly a balance declines, but this calculator does not model them. Check the lender’s terms for how additional payments are handled and use a separate calculation with the relevant dates and rules if you need an adjusted payoff estimate.

Frequently Asked Questions

How do I calculate a loan’s monthly repayment?
For a fixed-rate loan with equal monthly payments, use the amortization formula shown above: principal times monthly rate, divided by one minus the monthly growth factor raised to the negative number of payments. This calculator performs that calculation.

Does a longer loan term reduce total interest?
A longer term generally means more scheduled payments and can increase total interest when principal and rate are unchanged, even though the calculated monthly payment is lower. The exact figures depend on the inputs and loan terms.

Is APR the same as the interest rate?
APR is an annualized rate expressed as a percentage and may reflect certain borrowing costs depending on how the offer is stated. The calculator uses the APR entered as a nominal annual rate divided by 12; it does not independently calculate APR or add fees.

Why does my lender’s payment differ from this estimate?
Possible reasons include fees added to the balance, different payment dates, rounding, a variable rate, or a repayment structure that is not level-payment amortization. Compare the calculator assumptions with the lender’s disclosure and schedule.

Does the result include taxes or insurance?
No. The estimate covers principal and interest under its stated assumptions. Taxes, insurance, escrow, PMI, and other charges are not included unless represented in the inputs.

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.

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