Finance
Loan Calculator
Works a loan payment, where the term changes the total far more than it changes the payment.
Result
This is a standard amortising loan with equal payments and no fees. Origination fees, insurance or balloon payments change the real cost: the APR calculator accounts for fees.
Get a Free Business AuditHow the calculation works
The amortisation formula derives a level payment from the principal, the periodic rate and the number of periods, such that the balance reaches zero at the end of the term. The payment covers interest on the outstanding balance first, with the remainder reducing principal, which is why the split changes over the term while the payment does not.
What moves the number
- Principal, rate and term.
- Payment frequency.
- Fees, which the rate alone excludes.
- Whether extra payments are permitted.
Where this one goes wrong
Extending the term lowers the payment and raises the total interest substantially, which is why comparing loans on payment alone always favours the longest term and the most expensive outcome. Compare total cost. Fees are the other omission, since origination and arrangement charges are part of what the borrowing costs and the comparable figure that includes them is the APR rather than the interest rate.
Before you quote
- Compare total interest across terms, not just payments.
- Compare loans on APR, which includes certain fees.
- Check whether extra payments are allowed without penalty.
Questions
About this calculator
Why does a longer term cost so much more?
Because interest accrues on the outstanding balance for longer. The payment falls and the total rises substantially, which is why comparing on payment alone always favours the longest term and the most expensive result.
Why is so much of an early payment interest?
Because interest is charged on the outstanding balance, which is at its largest at the start. On a 200,000 loan at 6% over thirty years, the first payment of about 1,199 includes 1,000 of interest and only about 199 of principal.
Should I compare rate or APR?
APR, since it includes certain fees and is designed to be comparable. Two loans at the same interest rate with different fees cost different amounts, and the rate alone does not reveal it.
The formula
payment = P × i ÷ (1 − (1 + i)^−n), where i is the monthly rate and n the number of payments
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How to use this calculator
- Loan amount ($). Enter your own figure; the page starts at $45,000.
- Annual interest rate (%). Enter your own figure; the page starts at 8.5%.
- Term in years. Enter your own figure; the page starts at 5.
The result updates as you type, so you can try a figure, see what it does to monthly payment, and change it back. Nothing you enter is sent anywhere or saved.
A worked example
These are the figures the calculator opens with. Every number in the results column below is produced by the same calculation the page runs, so you can follow it through before putting your own figures in.
What goes in
| Input | Value |
|---|---|
| Loan amount | $45,000 |
| Annual interest rate | 8.5% |
| Term in years | 5 |
What comes out
| Result | Value |
|---|---|
| Monthly payment main result | $923.24 |
| Total interest | $10,395 |
| Total repaid | $55,395 |
| Number of payments | 60 |
Borrowing 45,000 at 8.5% over 5 years costs $923.24 a month and $10,395 in total interest.
How sensitive the answer is
Holding everything else steady and changing only loan amount, this is what happens to monthly payment. It is worth knowing which of your inputs the answer actually hinges on, and which barely move it.
| Loan amount ($) | Monthly payment |
|---|---|
| $22,500 | $461.62 |
| $33,750 | $692.43 |
| $45,000 example above | $923.24 |
| $67,500 | $1,384.87 |
| $90,000 | $1,846.49 |
Every other input is held at the example value while this one changes, which is not how a real job behaves. Treat it as a guide to which number matters most, not as five separate quotes.
What each figure means
- Loan amount ($)
- A money amount, starting at $45,000.
- Annual interest rate (%)
- A percentage, between 0 and 100, starting at 8.5%.
- Term in years
- A number, between 0 and 50, starting at 5.
What the results tell you
| Result | What it is |
|---|---|
| Monthly payment | The headline result. A money figure. |
| Total interest | A money figure. |
| Total repaid | A money figure. |
| Number of payments | A number. |
Rates and terms move
Loan and interest figures assume the rate and term you enter hold for the whole period. Variable rates, fees rolled into the balance and early-repayment terms all change the real cost.
Keep going
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