Loan Payment Calculator: Compare Monthly Costs

This loan payment calculator estimates the fixed monthly payment and total interest for a fully amortizing loan. Enter the loan amount, annual percentage rate (APR), and term in years; the results show the payment and the interest implied by those inputs.

Formula

The calculator uses the standard fixed-payment amortization formula. The monthly payment is:

PMT = P × r ÷ [1 − (1 + r)−n]

• P is the amount borrowed, in dollars.
• r is the monthly interest rate as a decimal: APR ÷ 100 ÷ 12. In the calculator expression, APR ÷ 1200 produces this rate.
• n is the number of monthly payments: loan term in years × 12.
• PMT is the monthly principal-and-interest payment, in dollars.

Total interest is estimated as PMT × n − P. The payment is rounded to cents before total interest is calculated, so the displayed result follows the calculator’s stated rounding method. This estimate assumes the same payment and rate throughout the term.

Worked Example

Using the calculator’s default inputs: principal P = $20,000, APR 8%, and term 5 years.

1. Convert the APR to a monthly decimal rate: r = 8 ÷ 1200 = 0.0066666667.
2. Convert the term to payments: n = 5 × 12 = 60.
3. Substitute into the payment formula: PMT = 20,000 × 0.0066666667 ÷ [1 − (1.0066666667)−60].
4. Rounded to cents, the monthly payment is $405.53.
5. Total interest is $405.53 × 60 − $20,000 = $4,331.80.

Assumptions

• The interest rate is fixed for the full term.
• Payments are monthly, made at the end of each payment period.
• Interest compounds monthly at APR ÷ 12.
• The estimate excludes fees, taxes, insurance, PMI, escrow, and any other charges not entered as inputs.

How to Compare Loan Payments

A monthly payment is useful for comparing the scheduled principal-and-interest cost of loans, but it does not tell the whole story. Two offers with different amounts, terms, rates, or fees cannot be compared fairly by looking at the payment alone. A longer term can lower the scheduled monthly payment while increasing the number of payments and potentially the total interest.

For a meaningful arithmetic comparison, use the same borrowing amount and compare each offer’s actual APR and term. If the amount financed differs because one option includes fees or add-ons, account for that difference separately. Ask the lender for the written payment schedule and the figures that apply to the specific offer; rates and charges are inputs, not something this calculator can look up.

• Monthly payment: the estimated regular principal-and-interest amount.
• Total interest: estimated interest over the full scheduled term, based on rounded monthly payments.
• Total scheduled payments: payment multiplied by the number of months. Add the principal to the displayed interest to see the approximate total of principal and interest.

When to Use the Estimate

Use the calculation to understand how changing one input affects a fixed-rate payment. For instance, enter the amount and term from a loan quotation, then enter the APR shown in the lender’s disclosure. You can also model a different term to see how the scheduled payment and interest estimate change, without treating the result as an approval decision or affordability assessment.

The formula applies to ordinary fully amortizing loans with equal monthly payments. In such a loan, each payment covers the period’s interest and reduces principal; as the balance declines, the interest portion generally falls. The final payment may differ slightly in an actual schedule because of exact dates, rounding, or servicing adjustments.

Common Errors and Limits

• Entering the APR as a decimal: enter 8 for 8%, not 0.08. The formula divides the percentage by 1200 to get a monthly decimal rate.
• Mixing years and months: the term field is in years. A five-year term becomes 60 monthly payments inside the formula.
• Comparing payment amounts without terms: a lower payment may reflect a longer repayment period rather than a lower borrowing cost.
• Assuming interest is the whole cost: fees and other costs are excluded unless included in the borrowed amount or separately accounted for.

This calculator does not model variable rates, skipped or irregular payments, interest-only periods, balloon payments, late charges, extra payments, or a payoff before the scheduled end date. For those situations, the lender’s payment schedule or a calculator built for that specific feature is needed. Its results are estimates, not a measure of credit eligibility or a recommendation about borrowing.

Frequently Asked Questions

How do I calculate a monthly loan payment?
Convert the annual APR to a monthly decimal rate by dividing it by 1200, convert the term to months, and use the fixed-payment formula shown above. This calculator performs those steps and rounds the payment to cents.

Does the monthly payment include fees and insurance?
No. It estimates principal and interest only. Fees, taxes, insurance, PMI, and escrow are not included unless they are part of the amount borrowed, and the calculation does not separately identify them.

Why can a longer loan term have more total interest?
A longer term usually means more payment periods. Even if the scheduled payment is lower, interest can accrue over more months. The estimate makes that trade-off visible for the inputs entered.

Is APR the same as the interest rate?
APR is an annualized measure used in lending disclosures and may reflect certain costs differently from the stated interest rate. This calculator treats the entered APR as the nominal annual rate divided monthly; it does not separately model fees included in an APR calculation.

Why does my lender’s payment differ from this result?
The lender may use a different amount financed, rate, term, payment date, fee treatment, or rounding method. Check the loan disclosure and amortization schedule for the exact figures that apply.

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