How to use the Loan Calculator
- Enter the loan amount you want to borrow.
- Enter the yearly interest rate the lender quotes.
- Enter the loan term in years. Use decimals for part of a year, such as 2.5.
- Read the monthly payment and the total interest, then try other terms in the table below.
Formula used
Payment = L × r × (1 + r)ⁿ ÷ ((1 + r)ⁿ − 1), where L is the loan, r the monthly rate and n the number of months.
Worked example
Here is the Loan Calculator worked through with the example values shown above, so you can check each step by hand.
| Inputs | |
|---|---|
| Loan amount | $15,000 |
| Interest rate (per year) | 9 % |
| Loan term | 5 years |
| Result | |
| Monthly payment | $311.38 |
| Total interest | $3,683 |
| Total repaid | $18,683 |
Payment by loan term
The default loan and rate over different terms.
| Loan term | Monthly payment | Total interest |
|---|---|---|
| 1 years | $1,311.77 | $741 |
| 2 years | $685.27 | $1,447 |
| 3 years | $477.00 | $2,172 |
| 5 years | $311.38 | $3,683 |
| 7 years | $241.34 | $5,272 |
| 10 years | $190.01 | $7,802 |
How the payment is calculated
The payment uses the amortisation formula: payment = L × r × (1 + r)ⁿ ÷ ((1 + r)ⁿ − 1), where L is the amount, r is the monthly rate (yearly rate ÷ 12) and n is the number of months. For $15,000 at 9% over 5 years, the payment is $311.38. You repay $18,683 in total, so the interest is $3,683.
Each payment is part interest and part principal. At first most of the payment is interest; as the balance falls, more goes to principal.
Term and rate: what changes the cost
A longer term lowers the payment but raises the total interest. The same $15,000 at 9% costs $477.00 a month over 3 years with $2,172 of interest, and $241.34 a month over 7 years with $5,272 of interest.
The rate matters as well. At 6% the 5-year payment is $289.99, at 12% it is $333.67. A few points on the rate can add or save hundreds of dollars over the loan.
Rate versus APR and fees
The interest rate is not the whole cost. Lenders may charge an origination fee, an insurance product or other charges, and the APR (annual percentage rate) rolls some of them into one figure. When you compare offers, compare the APR and the total repaid, not only the rate. If a fee is added to the loan, include it in the loan amount.
Check whether the loan has a prepayment penalty if you may want to pay it off early. The loan payoff calculator on this site shows the effect of extra payments.
Before you borrow
Borrow only what you need and check that the payment fits your monthly budget, with room for unexpected costs. A lower rate usually comes with a better credit history, so it can pay to check your credit report and compare several lenders.
This calculator is for planning. Your lender’s final figures may differ because of fees, rounding and payment dates.
Frequently asked questions
How is a loan payment calculated?
With the amortisation formula, using the loan amount, the monthly interest rate and the number of monthly payments.
Does this include fees?
No. Origination fees and insurance are not included. Add them to the loan amount if they are financed.
What is the difference between rate and APR?
APR includes some fees along with interest, so it is usually higher than the rate and better for comparing offers.
Is a shorter loan better?
A shorter loan costs less interest but has a higher payment. Choose the shortest term your budget can carry.
Can I use this for a student loan?
Yes, for fixed-rate loans with equal payments. Some student loans have deferment or income-based plans that this calculator does not model.
What if my loan has a variable rate?
Use the current rate for an estimate and test a higher rate to see how your payment could change.
This calculator gives estimates for information only. Actual figures from a bank, employer, tax authority or doctor may differ. It is not financial, tax, legal or medical advice.