This loan payment calculator estimates a fixed-rate loan’s monthly payment and total interest from the amount borrowed, annual percentage rate (APR), and term. Enter those figures to see the estimated payment and the interest paid over the scheduled term.
Formula
The calculator uses the standard level-payment formula for a loan repaid in equal monthly installments. It first calculates the payment from the principal, monthly interest rate, and number of monthly payments:
Payment = P × r ÷ [1 − (1 + r)−n]
- P is the amount borrowed, in dollars.
- r is the monthly interest rate as a decimal: APR ÷ 12 ÷ 100. In the calculator expression, this is APR ÷ 1200.
- n is the number of monthly payments: loan term in years × 12.
The second result is calculated as Total interest = monthly payment × n − P. The displayed payment is rounded to cents; total interest uses that displayed, rounded payment multiplied by the scheduled number of payments, then subtracts the original principal. Actual lender calculations can differ because of payment dates, rounding methods, fees, or other contract terms.
Worked Example
Using the calculator’s default inputs—$20,000 principal, 8% APR, and a five-year term—the monthly rate is 0.08 ÷ 12, or 0.0066667, and the term is 5 × 12 = 60 monthly payments.
- Substitute into the payment formula: $20,000 × 0.0066667 ÷ [1 − (1 + 0.0066667)−60].
- The unrounded result is about $405.53 per month; rounded to cents, the estimated payment is $405.53.
- Using the displayed payment, scheduled payments total $405.53 × 60 = $24,331.80.
- Subtract the $20,000 principal: $24,331.80 − $20,000 = $4,331.80 total interest.
These figures are estimates from the stated assumptions, not a lender’s payoff quote or a schedule of exact dated transactions.
Assumptions
- The interest rate stays fixed for the full term.
- Payments are equal monthly installments, made at the end of each monthly period.
- Interest compounds monthly at APR divided by 12.
- The calculation excludes fees, taxes, insurance, PMI, escrow, and any other charges because they are not inputs.
When to Use the Estimate
Use the calculator to understand how the loan amount, rate, and repayment period combine to affect a scheduled payment. It can help with neutral comparisons of hypothetical loan terms: keep two inputs unchanged and adjust the third to see the arithmetic effect. It does not establish whether a loan is available or appropriate for someone.
The payment covers both interest and principal under the formula. Early in a level-payment loan, interest generally makes up a larger share of each payment because it is calculated on a larger outstanding balance. As the balance falls, the interest portion falls and more of each scheduled payment goes toward principal. The payment itself stays level in this model.
Total interest is not the same as the total amount paid. The scheduled amount paid is the monthly payment multiplied by the number of payments; the principal is part of that amount, while total interest is the amount above the original principal. For the example, the scheduled amount is $24,331.80 and estimated interest is $4,331.80.
What Changes a Loan Payment?
- Principal: A larger amount borrowed raises the payment when other inputs are unchanged.
- APR: A higher entered APR increases the modeled cost of borrowing and generally raises the scheduled payment.
- Term: A longer term spreads repayment across more months and generally lowers the monthly payment, while interest can accumulate over more periods.
These are relationships within the formula, not predictions about rates or loan offers. Enter the rate and amount shown in the lender’s written disclosure for a particular offer; do not treat the example defaults as a quote. A rate advertised or described as an APR may also reflect details the simple formula does not model, so check what the lender’s figures include.
Common Mistakes and Limits
Enter APR as a percentage, such as 8 for 8%, not as 0.08. The calculator converts that annual percentage into a monthly decimal internally. Enter the term in years: for example, 30 means 30 years, not 30 months. The calculator converts years to 12 monthly periods per year.
A fixed-payment formula is not suitable for every borrowing arrangement. Variable rates, interest-only periods, balloon payments, irregular payment dates, deferred payments, and payment changes can produce a different schedule. The calculation also does not include an upfront fee or other amount added to the borrowing balance. If an actual payment differs, review the loan’s payment schedule and the assumptions used in its disclosure.
Rounding matters over many installments. This calculator rounds the monthly payment to the nearest cent and uses that rounded value for its total-interest result. A lender may round each period differently or adjust the final payment to clear the remaining balance, so a small difference from the estimate is possible.
Frequently Asked Questions
How do I calculate a monthly loan payment?
Use the principal, monthly interest rate, and number of monthly payments in the level-payment formula shown above. This calculator applies that formula and rounds the result to cents.
Is APR the same as the monthly interest rate?
No. APR is entered as an annual percentage. For this estimate, the monthly rate is APR divided by 12 and then by 100. The actual terms and costs represented by a disclosed APR depend on the loan documents.
Does a longer loan term reduce total interest?
Not necessarily. A longer term usually means more scheduled payments and can increase total interest even when the monthly payment is lower. The result depends on the entered principal and rate and on the contract’s terms.
Does this payment include taxes, insurance, or fees?
No. The calculator models principal and interest only. It does not include taxes, insurance, PMI, escrow, or fees.
Why might my lender’s payment differ?
The lender may use different rounding, payment dates, fees, or contract-specific calculations. Variable rates and other nonstandard repayment features also fall outside this fixed-rate estimate.
The 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
- Trade In an Old Laptop for a New One?
- Trade In an Old Phone: Value, Steps, and Alternatives
- Trade In an Old iPhone: Options, Value and Steps
- Trade In an Old Laptop? Options, Value, and Safety
- AT&T Trade-In Offers: How They Work
- Trade In an Old iPad: Options, Value, and Preparation