Loan Payment Calculator Guide
This calculator uses the standard amortization formula to compute your monthly loan payment, total interest, and total amount paid over the life of the loan.
The formula is the same used for mortgages:
Payment = P × [r(1+r)n] / [(1+r)n - 1]
Sample Loan Payments ($10,000 Loan)
| Rate | 3 Years | 5 Years | 7 Years |
|---|
| 5% | $300/mo | $189/mo | $141/mo |
| 6% | $304/mo | $193/mo | $146/mo |
| 7% | $309/mo | $198/mo | $151/mo |
| 8% | $313/mo | $203/mo | $156/mo |
| 10% | $323/mo | $212/mo | $166/mo |
| 12% | $332/mo | $222/mo | $177/mo |
Frequently Asked Questions
How is a loan payment calculated?
Monthly loan payments use the amortization formula: PMT = P × [r(1+r)^n] / [(1+r)^n - 1], where P is the principal, r is the monthly interest rate, and n is the number of monthly payments.
What is APR vs interest rate?
The interest rate is the cost of borrowing the principal. APR (Annual Percentage Rate) includes the interest rate plus any fees or additional costs, making it a more complete measure of borrowing cost.
How does loan term affect total cost?
Longer terms have lower monthly payments but higher total interest. A $20,000 loan at 6% costs $386/mo over 5 years ($3,200 total interest) vs. $665/mo over 3 years ($1,930 total interest).
What is amortization?
Amortization is the process of paying off a loan through regular payments. Early payments are mostly interest; later payments are mostly principal. An amortization schedule shows this breakdown for each payment.
Should I pay off my loan early?
Paying off loans early saves on interest. Check for prepayment penalties first. Generally, paying extra toward the principal reduces total interest and shortens the loan term.