Loan Calculator
This loan calculator estimates your periodic loan payment (monthly by default) based on the loan amount, interest rate, and term. It also shows total interest, total paid, and a simple amortization schedule.
About This Calculator
How to Use
- Enter the Loan Amount (principal you're borrowing)
- Enter the Interest Rate (APR as annual percentage)
- Enter the Loan Term in years
- Choose Payments per Year (12=monthly, 26=biweekly, 52=weekly)
- Click Calculate to see payment details and full amortization schedule
- Use Print button to save or print your results
Understanding Loan Payments
A loan is borrowed money that must be repaid over time with interest. When you take out a loan, you agree to make regular payments that cover both the principal (original amount borrowed) and interest (cost of borrowing). Understanding how loans work helps you make informed financial decisions and choose the best loan terms for your situation.
Key Loan Components:
- Principal: The original amount you borrow
- Interest Rate (APR): Annual percentage rate - the cost of borrowing
- Term: The length of time you have to repay the loan
- Payment: Regular amount you pay (usually monthly)
- Amortization: The gradual reduction of your loan through scheduled payments
Most loans use an amortization schedule where early payments go mostly toward interest, while later payments pay down more principal. This calculator shows you exactly how your loan will be paid off over time.
Loan Payment Formula
The standard loan payment formula (fixed-rate amortizing loan):
Payment = Loan × [r(1 + r)^n] / [(1 + r)^n - 1]
Where: Loan = loan amount, r = periodic interest rate, n = number of payments
Example Calculation:
Loan: $10,000 | Rate: 10% APR | Term: 3 years
Monthly rate: 10% / 12 = 0.00833
Payments: 3 × 12 = 36
Monthly Payment = $322.67
Total Paid = $11,616.12
Total Interest = $1,616.12
Understanding Amortization
Amortization is the process of paying off a loan through regular payments over time. Each payment consists of two parts: principal repayment and interest charges. The way these are split changes over the life of the loan.
Higher portion goes to interest, smaller portion to principal
Interest and principal portions become more balanced
Higher portion goes to principal, smaller portion to interest
Why This Matters: Understanding amortization helps you see the true cost of your loan. Making extra principal payments early in the loan can significantly reduce total interest paid and shorten your loan term.
Practical Use Cases
- Auto Loans: Calculate car loan payments and compare financing offers
- Personal Loans: Compare loan offers and understand total borrowing costs
- Student Loans: Understand repayment obligations for education financing
- Business Loans: Plan business financing and cash flow management
- Debt Consolidation: Evaluate refinancing options and interest savings
- Home Improvement: Budget for renovation projects with financing
- Equipment Financing: Calculate payments for business equipment
Frequently Asked Questions
What's the difference between interest rate and APR?
The interest rate is the cost of borrowing as a percentage. APR (Annual Percentage Rate) includes interest plus fees, showing the total cost of borrowing. For simple loans, they're often the same.
Should I choose a shorter or longer loan term?
Shorter terms mean higher monthly payments but lower total interest. Longer terms mean lower payments but more interest. Choose the shortest term you can afford.
Can I pay off my loan early?
Most loans allow early payoff, but check for prepayment penalties. Extra principal payments can save thousands in interest and shorten your loan term significantly.
What's a good interest rate?
Rates vary by loan type and credit: auto loans 4-7%, personal loans 6-36%, student loans 5-10%. Better credit scores qualify for lower rates.
How can I lower my loan payments?
Improve your credit score, make a larger down payment, extend the term (more interest), shop multiple lenders, or add a co-signer with better credit.