Loan Payment Calculator Guide
Estimate monthly payments, total interest, and why rate and term matter.
Quick Answer
M = P × r(1 + r)^N / ((1 + r)^N − 1); at r = 0, M = P/NWhen to Use This
Estimate a fully amortizing fixed-rate loan with equal monthly payments. P is the borrowed amount, r is the monthly decimal interest rate, and N is the number of payments. Fees and lender-specific timing are excluded. The formula uses the loan interest rate; a disclosed APR that includes fees may not be the same input.
Step-by-Step Method
- Use the borrowed principal before separate fees.
- Convert a 6% annual interest rate to r = 0.06/12 = 0.005 per month.
- Convert the term in years to N = years × 12.
- Calculate M, then calculate total paid M × N and interest M × N - P using the unrounded payment.
Calculator Tips and Limits
- Use the linked loan tool to compare the same principal and interest rate over different terms.
- The tool labels the input annual interest rate; review its assumptions and your lender disclosures before equating that rate with a fee-inclusive APR.
Worked Examples
Three-year repayment
Borrow $12000 at a fixed 6% annual interest rate for 3 years. r = 0.005 and N = 36. Substitution gives M ≈ $365.06 per month. Using the unrounded M, total paid is about $13142.28 and interest is $1142.28.
The cost of a longer term
At the same principal and rate over 5 years, N = 60 and M ≈ $231.99. Total interest becomes about $1919.62. The payment is lower, but estimated interest rises by $777.34. This comparison excludes fees and prepayments.
Common Mistakes
Multiplying a rounded display to reconstruct exact totals
The displayed monthly payment has two decimals. Totals here use the unrounded payment; actual final payments may be adjusted by the lender.
Comparing monthly payments without terms
A smaller monthly payment can come from spreading repayment over more months, not from a cheaper loan. Compare total interest and fees too.
FAQ
How is a zero-interest loan calculated?
Divide principal by payment count. For $12000 over 36 months, the unrounded payment is $333.333…, with total principal $12000 and interest zero.
Does this include origination fees or early payoff?
No. Those require additional cash flows and lender-specific rules. Compare the actual agreement and disclosures before making a financial decision.
References and corrections
CFPB: Interest rate and APR. The worked examples on this page are CalcSolver explanations. Read our calculation and correction method, or report an error with the input and expected result.