calculate-loan

01 Loan payments

Term Loan Interest Calculator: Payment and Total Cost

Calculator No. 01-8402 · Updated · Formula and assumptions shown below

Monthly payment $405.53
Total interest
$4,331.80
= 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.

A term loan interest calculator estimates the fixed monthly payment and total interest for a loan repaid over a set period. Enter the amount borrowed, annual percentage rate (APR), and term in years to see an estimate based on equal monthly payments.

Formula

The calculator uses the standard amortizing-loan payment formula. It converts the annual APR to a monthly rate, calculates a level payment that repays principal and interest over the full term, rounds that payment to cents, and then subtracts the original principal from all scheduled payments.

  • P is the loan principal, in dollars.
  • APR is the annual percentage rate, entered as a percentage such as 8 for 8% per year.
  • r is the monthly rate as a decimal: APR ÷ 1,200.
  • n is the number of monthly payments: years × 12.
  • M is the monthly payment, in dollars: M = round[P × r ÷ (1 − (1 + r)−n), 2].
  • I is estimated total interest, in dollars: I = M × n − P.

Rounding the payment before calculating total interest matches the displayed monthly amount. Because each payment is rounded to cents, the final payment on a real loan can differ slightly from the estimate.

Worked Example

Using the calculator’s default inputs—$20,000 principal, 8% APR, and a five-year term—there are 5 × 12 = 60 monthly payments. The monthly rate is 8 ÷ 1,200 = 0.0066667, or about 0.66667%.

  1. Payment before cent rounding: $20,000 × 0.0066667 ÷ [1 − (1 + 0.0066667)−60] ≈ $405.53.
  2. Rounded monthly payment: $405.53.
  3. Total of scheduled payments: $405.53 × 60 = $24,331.80.
  4. Estimated total interest: $24,331.80 − $20,000 = $4,331.80.

Assumptions

  • The interest rate is fixed for the full term.
  • Payments are equal, monthly, and made at the end of each monthly period.
  • Interest compounds monthly at APR ÷ 12.
  • The estimate excludes fees, taxes, insurance, PMI, and escrow. It also does not model late payments, skipped payments, or extra principal payments.

When to Use the Calculator

A term loan is repaid through scheduled payments over an agreed period. The calculator is useful for understanding how the principal, APR, and repayment length combine mathematically. It can also help you check a payment estimate against loan terms supplied by a lender. Enter the actual proposed figures when available; the default values are only an example and do not describe a current or typical offer.

The output is an estimate of scheduled principal-and-interest payments, not an approval decision or a complete measure of borrowing cost. A quoted APR may reflect some costs differently from the nominal interest rate, and individual loan disclosures may include charges or payment details that this simple formula does not capture. Use the lender’s stated payment schedule and disclosures for the exact figures.

How the Results Change

With principal and APR held constant, extending the term generally lowers the calculated monthly payment but increases the number of months during which interest accrues. A shorter term generally raises the monthly payment and reduces the total interest under this fixed-rate model. Raising the APR increases both the payment and total interest when the principal and term stay the same.

For example, changing only the term does not change the amount borrowed, but it changes the payment schedule. This is why a monthly payment alone cannot show the full cost: compare it with the number of payments and the estimated total interest. The calculator does not decide whether a payment fits any particular budget.

Common Mistakes and Limits

  • Entering a percentage as a decimal: Enter 8 for 8%, not 0.08. The calculator handles conversion to a monthly decimal rate.
  • Confusing years and months: The term field is in years. A five-year term becomes 60 payments, not five payments.
  • Treating interest as the payment: Each scheduled payment includes principal as well as interest. Early payments on an amortizing loan generally allocate a larger share to interest than later payments.
  • Assuming every term loan is level-payment: Some contracts may have variable rates, irregular payments, interest-only periods, balloon payments, or other structures. This calculator does not represent those arrangements.
  • Ignoring fees or payment dates: Fees and nonstandard timing can affect the amount paid or the effective cost. They are not inputs here.

The calculation assumes all scheduled payments are made on time and that the rate and payment structure remain unchanged. It is not a payoff quote: a payoff amount on a particular date may account for accrued interest, fees, or other contract details.

Frequently Asked Questions

How do I calculate interest on a term loan?
For a fixed-rate loan with equal monthly payments, first calculate the monthly payment using the principal, monthly rate, and number of payments. Multiply that rounded payment by the number of payments, then subtract the principal to estimate total interest.

Does this calculator show total interest or just the monthly payment?
It shows both: the monthly payment and the estimated total interest across the scheduled term. Total interest is calculated from the rounded monthly payment used in the example output.

Why does a longer loan term usually cost more in interest?
With the same principal and APR, a longer term means more monthly periods for interest to accrue. It commonly lowers the monthly payment while increasing the total interest in this model.

Is APR the same as the interest rate?
Not necessarily. APR is an annualized rate that may account for certain borrowing costs, depending on how it is presented. This calculator treats the entered APR as the rate used in the monthly-payment formula; it does not separately model fees.

Does the estimate include loan fees or extra payments?
No. It models fixed-rate, equal monthly payments only. Fees, extra payments, variable rates, and contract-specific adjustments require additional information and are not included.

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 | $ | round(p * (apr / 1200) / (1 - (1 + apr / 1200) ^ -(yrs * 12)), 2) | 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

The whole Loan payments section →