Simple Bank Loan Calculator: Monthly Payment and Interest

A simple bank loan calculator estimates a fixed-rate loan’s monthly payment and total interest from the amount borrowed, annual percentage rate (APR), and loan term. Enter those three figures to see the estimated payment and the interest paid over the full term.

Formula

The calculator uses the standard fixed-payment loan formula. It converts the annual percentage rate to a monthly rate, then calculates the payment that pays off the starting balance over the specified number of monthly payments.

• Monthly payment: M = P × r / [1 − (1 + r)⁻ⁿ]
• Total interest: I = M × n − P
• Monthly rate: r = APR / 1,200
• Number of payments: n = years × 12

Here, P is the loan amount in dollars, APR is the annual percentage rate entered as a percentage, r is the monthly rate as a decimal, n is the number of monthly payments, M is the monthly payment in dollars, and I is total interest in dollars. The calculator displays the payment to the nearest cent and uses that rounded payment to estimate total interest.

Worked Example

Using the calculator’s default inputs—$20,000 borrowed, an 8% APR, and a five-year term:

1. Convert the APR to a monthly rate: 8 ÷ 1,200 = 0.0066667.
2. Convert the term to payments: 5 × 12 = 60 monthly payments.
3. Substitute into the payment formula: $20,000 × 0.0066667 ÷ [1 − (1.0066667)⁻⁶⁰] ≈ $405.53 per month.
4. Estimate total interest using the displayed payment: $405.53 × 60 − $20,000 = $4,331.80.

These figures are estimates produced by the stated formula. A lender’s schedule may differ because of the contract’s payment dates, rounding method, fees, or other loan terms.

Assumptions

• The interest rate is fixed for the entire loan term.
• Payments are equal, made monthly, and treated as occurring at the end of each monthly period.
• Interest compounds monthly at APR divided by 12.
• The calculation excludes fees, taxes, insurance, PMI, and escrow; none of these are inputs.

How to Use the Calculator

Use the loan amount you expect to borrow, rather than the total price of an item unless you are financing all of it. Enter the APR supplied for the loan as a percentage—for example, enter 8 for 8%, not 0.08. Enter the repayment period in years. The calculator converts years to months automatically.

For a useful estimate, use figures from the same loan offer or scenario. The APR and term should apply to the amount entered. If you are comparing possible terms or rates, change one input at a time and note that a different term changes both the payment and the length of time interest accrues. The calculator accepts loan amounts from $1 to $100 million, APRs from 0.01% to 100%, and terms from about one month to 50 years; these are calculator input limits, not statements about what a lender offers.

Understanding the Results

The monthly payment is the scheduled amount of principal and interest under the formula’s assumptions. Early in a standard amortizing loan, a larger portion of each payment generally goes to interest; later, more goes to principal. Total interest is the estimated interest across all scheduled payments. It is not the total amount repaid: add the original loan amount to the displayed interest to get that estimate. For the default example, that sum is $24,331.80.

The monthly payment is not necessarily the complete monthly cost of borrowing or owning something. A payment can be accompanied by charges or expenses the formula does not include. Check the lender’s written figures to identify the payment due, any upfront or recurring charges, and whether the quoted APR and payment cover the same items. Obtain the actual rate, fees, and loan terms from the lender; the example rate here is only a neutral calculation input.

Common Mistakes and Limits

• Entering a decimal instead of a percentage: APR is entered as a percent, so 8% is entered as 8.
• Mixing the term units: This calculator asks for years, not months. A five-year term is entered as 5.
• Treating the result as a quote: The calculation does not know the lender’s contract, exact payment dates, or rounding rules.
• Assuming every loan has level payments: The formula models a fixed rate and equal monthly payments. It does not model a variable rate, interest-only period, balloon payment, or changing payment schedule.
• Ignoring additional costs: Fees and other expenses are excluded, so the total interest result is not a complete measure of every cost connected with a loan.

Rounding also matters. The monthly payment is rounded to cents before total interest is calculated. A lender may calculate each period using more precise values and round individual amounts differently, so a small difference can appear in a final schedule or payoff figure.

Frequently Asked Questions

How do I calculate a bank loan’s monthly payment?
Convert APR to a monthly rate by dividing it by 1,200, convert the term to months, and use the fixed-payment formula shown above with the amount borrowed. This calculator carries out those steps.

Does the calculator include fees?
No. It estimates principal-and-interest payments only. Check the lender’s disclosure for fees and any other amounts that apply to the loan.

Is APR the same as the monthly interest rate?
No. APR is entered as an annual percentage here. The formula uses APR divided by 12 to create a monthly rate expressed as a decimal.

Why might my bank’s payment be different?
The lender may use different timing, rounding, payment dates, or loan terms, or include amounts this calculator excludes. Compare the calculator’s inputs with the figures in the lender’s documents.

Can I use this for a variable-rate or interest-only loan?
Not as a complete payment estimate. This calculator assumes a fixed rate and fully amortizing equal monthly payments, so it does not represent changing rates or interest-only periods.

The result is an estimate, and the lender’s disclosure gives the exact figures.

Related

• APR Calculator: The True Rate of a Loan With Fees
• Simple Interest Loan Calculator: I = P × r × t
• Interest-Only Loan Calculator: Payment During and After the Interest-Only Period

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