calculate-loan

01 Loan payments

Total Cost of a Loan Calculator and Formula

Calculator No. 01-6272 · Updated · Formula and assumptions shown below

Monthly payment $405.53
Total interest
$4,331.67
= 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 total cost image is not a standard finance term; if you mean a loan’s total cost, this calculator estimates the total of its scheduled monthly payments and the interest paid over the term. Enter the loan amount, annual percentage rate (APR), and term to see the monthly payment and total interest; fees and other charges are not included.

Formula

The calculator uses the standard fixed-rate, fully amortizing loan payment formula. It first finds the monthly payment, then multiplies that rounded payment by the number of scheduled payments to determine the total paid. Total interest is the total paid minus the amount borrowed.

  • P = principal, or amount borrowed, in dollars.
  • APR = annual percentage rate entered as a percentage, such as 8 for 8%.
  • r = monthly interest rate, calculated as APR ÷ 1,200.
  • n = number of monthly payments, calculated as years × 12.
  • M = monthly payment in dollars, rounded to the nearest cent.

In symbols, M = P × r ÷ [1 − (1 + r)−n]. Then total paid = M × n, and total interest = total paid − P. The displayed payment is rounded to cents before total interest is calculated, so the estimate reflects a fixed payment at that rounded amount.

Worked Example

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

  1. Convert the APR to a monthly rate: 8 ÷ 1,200 = 0.0066667, or about 0.66667% per month.
  2. Find the number of monthly payments: 5 × 12 = 60.
  3. Apply the payment formula: $20,000 × 0.0066667 ÷ [1 − (1.0066667)−60] = approximately $405.53 per month, rounded to cents.
  4. Calculate total scheduled payments: $405.53 × 60 = $24,331.80.
  5. Subtract the principal to estimate interest: $24,331.80 − $20,000 = $4,331.80 in total interest.

These figures use the calculator’s default values and assumptions. The monthly payment is the headline result; total interest is a separate output that helps show the borrowing cost over the full schedule.

Assumptions

  • The interest rate is fixed for the entire term.
  • Payments are equal, made monthly, and paid at the end of each monthly period.
  • Interest accrues monthly using APR divided by 12.
  • The estimate excludes fees, taxes, insurance, PMI, escrow, late charges, and optional add-ons because they are not inputs.
  • The calculation assumes payments are made on schedule and does not model a different final payment caused by a lender’s daily-interest or rounding method.

What “Total Cost” Includes

In this calculator, total cost means the sum of scheduled principal-and-interest payments. Because those payments repay both the amount borrowed and the financing charge, the estimated total paid is principal plus interest. It does not mean every dollar a borrower might pay in connection with a loan.

For example, a loan with $20,000 principal and $4,331.80 estimated interest has $24,331.80 in scheduled payments under the example assumptions. If an arrangement also has an origination charge or other costs, those are not reflected here. To build a more complete estimate, obtain the applicable amounts and add them separately; do not assume that APR or a quoted payment includes every possible charge in the same way.

When to Use the Estimate

This calculation is useful for understanding how a fixed rate and repayment length affect the scheduled payment and interest total. It can help explain the arithmetic behind a loan quote or provide a neutral comparison when the amount, APR, term, and included charges are defined consistently. Enter the figures supplied by the lender rather than treating the sample defaults as market rates or an offer.

Changing one input changes the result. A longer term generally spreads repayment across more payments and can lower the required monthly payment, while interest may accrue for a longer period. A higher APR increases the monthly interest rate used in the formula. The exact effect depends on the combination of principal, rate, term, and payment rules.

Limits and Common Mix-Ups

  • APR versus monthly rate: Enter the annual APR as a percentage, such as 8, not as 0.08 and not as the monthly rate. The formula converts it to a monthly rate by dividing by 1,200.
  • Years versus months: The term field is in years. Five means 60 payments, not five payments.
  • Interest versus total paid: Total interest is not the full repayment amount. Add principal to interest to get the scheduled total.
  • Fees and add-ons: They are not automatically included. A quoted APR, payment, and lender disclosure may use details not represented by this simplified calculator.
  • Variable rates or unusual schedules: The calculation assumes a fixed APR and equal monthly payments. It does not model rate changes, skipped payments, extra payments, balloon payments, or irregular payment dates.
  • Rounding: Payments are rounded to cents, and multiplying that rounded payment by the number of months can differ slightly from a lender’s final schedule if its rounding or final-payment procedure differs.

Frequently Asked Questions

What does total cost of a loan mean?
It can refer to the amount repaid including principal, interest, and possibly fees. This calculator reports scheduled principal-and-interest payments and the interest portion only; it does not include additional charges.

How do I calculate total interest on a loan?
For this fixed-payment estimate, multiply the monthly payment rounded to cents by the number of monthly payments, then subtract the original principal. The result is the estimated interest paid over the schedule.

Does this calculator include loan fees?
No. There are no inputs for fees, taxes, insurance, PMI, or escrow. Check the lender’s disclosure for the figures and charges that apply to a particular loan.

Why does a longer loan term change total interest?
A longer term means more monthly periods in which interest can accrue. It can also change the payment amount. The calculator applies the same fixed APR across every month and shows the resulting scheduled interest.

Is APR the same as the monthly interest rate?
No. APR is entered as an annual percentage. This calculator divides it by 12 to get the monthly rate; for example, 8% APR becomes about 0.66667% per month under the stated assumption.

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 | $ | 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.

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