calculate-loan

01 Loan payments

Term Loan Repayment Calculator and Payment Formula

Calculator No. 01-3108 · 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 repayment calculator estimates the fixed monthly payment and total interest for a loan repaid in equal monthly installments. Enter the loan amount, annual percentage rate (APR), and term in years to see the estimated payment and interest, using a fixed-rate monthly-payment formula.

Formula

The calculator first converts the annual percentage rate to a monthly rate, then calculates the level payment that amortizes the principal over the full term. It rounds the monthly payment to cents before calculating total interest.

  • Monthly rate: r = APR / 1200, where APR is entered as a percentage per year.
  • Number of payments: n = 12 × years.
  • Monthly payment: Payment = round[P × r / (1 − (1 + r)−n), 2].
  • Total interest: Interest = (rounded monthly payment × n) − P.

P is the amount borrowed in dollars; APR is the annual percentage rate in percent; r is the monthly rate as a decimal; n is the number of monthly payments; and years is the loan term. The formula assumes payments are level and made monthly. Since the total-interest calculation uses the payment rounded to cents, it may differ slightly from a calculation using an unrounded payment throughout.

Worked Example

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

  1. Convert the APR to a monthly decimal rate: 8 ÷ 1200 = 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] = about $405.53 per month after rounding to cents.
  4. Calculate total interest using the rounded payment: $405.53 × 60 − $20,000 = $4,331.80.

The estimated monthly payment is $405.53, and estimated total interest is $4,331.80. Actual lender figures can differ because of payment dates, rounding practices, fees, or loan terms not included here.

Assumptions

  • The interest rate stays fixed for the entire term.
  • Payments are equal monthly installments, with the first payment one month after the loan is made.
  • Interest is treated as compounding monthly at APR divided by 12.
  • Fees, taxes, insurance, PMI, escrow, late charges, and optional extra payments are not included.

When to Use a Term Loan Repayment Calculator

Use this estimate to understand the basic payment and interest implied by a proposed principal, APR, and repayment period. It can also help you compare the arithmetic of different terms while holding the other inputs constant. For example, a longer term generally spreads repayment over more months and lowers the scheduled payment, but it can result in more total interest when the rate and principal are unchanged.

Enter the amount actually being financed rather than an item’s sticker price if a deposit or down payment reduces the borrowed balance. Use the APR supplied in the lender’s disclosure or quote, not a rate guessed from an advertisement. If the loan has a variable rate, a balloon payment, interest-only period, or irregular repayment schedule, this level-payment calculator does not represent the full contract.

How to Read the Results

Monthly payment is the scheduled principal-and-interest amount under the formula. Total interest is the sum of those rounded monthly payments minus the original loan amount. It is not the total amount paid: add the principal to the displayed interest to get the calculator’s estimated total of scheduled payments.

In the example, $405.53 × 60 equals $24,331.80, consisting of the original $20,000 principal and $4,331.80 in calculated interest. Early payments in an amortizing loan include a larger interest portion than later payments because interest is calculated on the outstanding balance. The formula determines the level payment, but this calculator does not display a month-by-month amortization schedule.

Common Mistakes and Limits

  • Entering a whole-number rate incorrectly: Enter 8 for 8%, not 0.08. The formula divides the percentage input by 1200 to obtain a monthly decimal rate.
  • Confusing APR with the periodic rate: APR is annual and entered as a percentage. Do not enter a monthly rate in its place.
  • Using the wrong term: The term field is in years. A five-year term means 60 monthly payments, not five payments.
  • Ignoring included charges: If a lender finances an origination charge or another cost, the actual principal may exceed the amount you expected. The calculator does not add fees automatically.
  • Assuming every term loan has fixed installments: Some contracts use variable rates, seasonal payments, a final balloon payment, or other schedules. A standard amortization formula cannot capture those features.

Rounding also matters. The calculator rounds the installment to the nearest cent and multiplies that displayed payment by the number of months. A lender may adjust the final installment by a small amount to bring the balance to zero, and exact totals depend on its payment and interest calculations.

Frequently Asked Questions

How do I calculate a term loan monthly payment?
Convert APR to a monthly decimal rate by dividing the percentage by 1200, calculate the number of monthly payments, and apply the level-payment formula shown above. The result is an estimate for a fixed-rate loan with equal monthly installments.

Does the calculator include the principal in total interest?
No. Total interest is calculated as total scheduled payments minus the original principal. Add the loan amount to interest to estimate the combined scheduled payments under the calculator’s assumptions.

Why can my lender’s payment differ from this estimate?
The lender may use different payment dates, rounding, financed fees, or contract terms. A variable rate or a nonstandard repayment schedule also changes the calculation. Check the lender’s disclosure for the figures that apply to the actual loan.

Can I use this calculator for a variable-rate loan?
It can show a hypothetical payment if you enter one APR, but it assumes that rate remains unchanged for the full term. It does not forecast rate changes or recalculate payments over time.

Does paying extra reduce the interest shown?
Extra principal payments can change a loan’s balance and interest over time, but this calculator assumes only the scheduled equal payment. It therefore does not estimate the effect of additional payments or any related contract conditions.

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 →