Loan Calculator
Check a fixed loan payment, total paid, and interest cost from the loan amount, rate, and term.
By The Calcumatix Team Reviewed by Calcumatix Editorial Review
Monthly payment
$386.66
Total interest: $3,199.36|Total paid: $23,199.36
Educational estimate for a fixed-rate loan. It excludes fees, taxes, insurance, and lender-specific rounding.
Quick Answer
The monthly payment on a fixed-rate loan is P times r times (1 + r) to the power n, divided by ((1 + r) to the power n minus 1), where r is the monthly rate and n the number of months. A 20,000 loan at 6 percent over 5 years is about 386.66 a month, or 23,199.36 in total.
What A Loan Calculator Does And How It Works
A loan calculator checks the set payment for a loan paid back each month. The tool uses the loan amount, yearly rate, and term to show the payment, total paid, and interest cost. Each payment has two parts: interest and principal. Early in the loan, more of the payment goes to interest because the balance is still high. Later, more goes to principal because the balance is lower. This helps when you compare loan offers, plan a budget, or test how much a long term may cost. A short term can cost more each month. It can cut the total cost. A long term can fit a budget. It may add more interest. The result is an estimate, not a lender quote. Real loans can add fees, taxes, insurance, escrow costs, rate changes, and lender rounding.
The Loan Calculator Formula And How It Is Applied
The fixed payment formula is M = P x r x (1 + r)^n / ((1 + r)^n - 1).
- M is the monthly payment.
- P is the loan principal, or the amount borrowed.
- r is the monthly interest rate, found by annual rate / 12 / 100.
- n is the total number of monthly payments, found by years x 12.
- If the interest rate is 0, the payment is P / n.
This formula fits a loan with one fixed rate and equal payments each month. CFPB says lenders use standard math for most home loan principal and interest payments. CFPB also says a full monthly bill can include taxes, insurance, and other costs.
How To Use A Loan Calculator In Clear Steps
Inputs
- Loan amount: the amount borrowed, before interest.
- Annual interest rate: the yearly rate as a percent.
- Term in years: the years used to pay back the loan.
Steps
- Enter the loan amount.
- Enter the annual interest rate.
- Enter the repayment term in years.
- Read the monthly payment and total interest.
- Compare the result with lender costs not included here.
Loan Calculator Example, Worked In Full
What is the monthly payment on a $20,000 loan at 6 percent for 5 years?
- Monthly rate: 6 / 12 / 100 = 0.005.
- Number of payments: 5 x 12 = 60.
- Growth factor: (1 + 0.005)^60 = 1.3488501525.
- Monthly payment: 20000 x 0.005 x 1.3488501525 / (1.3488501525 - 1) = 386.6560306.
- Rounded monthly payment: $386.66.
- Total repaid: $386.6560306 x 60 = $23,199.36.
- Total interest: $23,199.36 - $20,000 = $3,199.36.
- Rounding: money values are rounded to the nearest cent.
About $386.66 per month, with $23,199.36 total repaid and $3,199.36 in interest.
When A Loan Calculator Gives The Right Answer
Use this tool when the loan has a fixed rate, a fixed term, and equal payments each month. It works well for quick checks on personal loans and auto loans. It can also help compare simple loan offers.
It is less useful when a rate can change. It also does not fit balloon loans, interest-only periods, extra fees, or payment dates that change. In those cases, ask the lender for a full payback plan.
A small rate change can matter. A short term can raise the monthly bill. A long term can lower it. It may cost more in interest.
For related finance checks, visit the finance calculators hub, read the formula reference, or use the glossary for terms such as amortization, principal, and interest.
Assumptions
- The loan uses a fixed annual interest rate.
- Payments are monthly and equal.
- The loan fully amortizes to zero by the end of the term.
- Payments are made at the end of each month.
- Results are rounded only for display.
The payment shown is principal and interest only. If a lender includes fees, insurance, taxes, or escrow, compare this estimate with the full quote before making a decision.
Limitations
- The calculator does not include origination fees or closing costs.
- The calculator does not include taxes, insurance, or escrow costs.
- The calculator does not handle adjustable-rate loans.
- The calculator does not model extra payments.
- Lender quotes may differ because of fees and rounding rules.
In Practice
The most common mistake is judging a loan by the monthly payment alone. A longer term lowers the monthly figure but raises total interest, sometimes by a lot. Always read the total repaid and total interest beside the payment, and compare loans on the total cost, not just what leaves your account each month.
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Frequently Asked Questions About Loan Calculator Math
How is a monthly loan payment calculated?
A loan payment uses the fixed-payment loan formula. The formula uses the loan amount, rate for one month, and payment count. It sets the payment so the balance reaches zero at the end of the term.
Why is total interest higher on longer loans?
Total interest is often higher on longer loans because interest has more months to build up. A longer term can lower the payment due each month. It often means you pay interest for more time.
Does this loan calculator include APR or fees?
This tool does not include APR, fees, taxes, or insurance costs. It shows principal and interest only. Compare the result with the lender's full loan quote.
What does amortization mean for a loan?
Amortization means each payment is split between interest and principal over time. CFPB says early payments often go more to interest. Later payments go more to principal.
Is the payment the same as my lender quote?
The payment may differ from a lender quote because real loans can include extra costs. Fees, escrow, insurance costs, taxes, rate type, and exact rounding can all change the amount due.
Can I use this calculator for a mortgage?
You can use it to estimate the principal and interest part of a fixed-rate mortgage payment. A real mortgage bill may also include property taxes, insurance, mortgage insurance, HOA fees, and escrow items.
Sources
- Consumer Financial Protection Bureau, How do mortgage lenders calculate monthly payments?
- Consumer Financial Protection Bureau, What is amortization and how could it affect my auto loan?
- Consumer Financial Protection Bureau, Loan Estimate Explainer
- Mississippi State University Extension, Paying Off Your Loans: Loan Amortization
Reviewed for accuracy against the formula shown above.