Loan Calculator
A loan calculator estimates the fixed monthly payment on an amortized loan (such as a mortgage, auto loan, or personal loan) from the loan amount, annual interest rate, and repayment term. It also shows the total interest and total amount you will pay over the life of the loan.
How to calculate a loan payment
- Enter the loan amount (principal) you plan to borrow.
- Enter the annual interest rate offered by your lender.
- Set the loan term: how many years you will take to repay.
- Read your monthly payment, total interest, and total repayment amount.
- Adjust the rate or term to compare offers and see how they change the cost.
Frequently Asked Questions
How is the monthly payment calculated?
The monthly payment is calculated using the formula: Payment = Principal × (Rate × (1 + Rate)^Term) ÷ ((1 + Rate)^Term - 1), where Rate is the monthly interest rate (annual rate divided by 12) and Term is the total number of payments (years × 12 for monthly payments).
What factors affect my loan payment?
The four main factors are: loan amount (principal), interest rate, loan term (length), and payment frequency. Increasing the loan amount or interest rate increases payments. Extending the loan term reduces monthly payments but increases total interest paid over the life of the loan.
What's the difference between fixed and variable rate loans?
Fixed rate loans maintain the same interest rate throughout the loan term, providing predictable payments. Variable (or adjustable) rate loans have interest rates that can change periodically based on market indices, resulting in payments that may increase or decrease over time.
How does an extra payment affect my loan?
Making extra payments towards the principal reduces the outstanding balance faster, shortens the loan term, and decreases the total interest paid. Even small additional principal payments, especially early in the loan term, can save significant interest over the life of the loan.
What is amortization?
Amortization is the process of paying off a debt over time through regular payments. Each payment goes partly toward the principal balance and partly toward interest. Early in the loan, more of your payment goes toward interest; as the principal decreases, more goes toward principal in later payments.
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