Loan Calculator
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Calculate monthly payments, total interest, and total cost for any loan — car, personal, student, or business.
💳 Loan Calculator
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How Loan Payments Are Calculated
All amortizing loans — personal loans, car loans, student loans — use the same standard formula. Each payment covers the interest accrued on the outstanding balance since the last payment, with the remainder reducing the principal. Because the balance decreases over time, less interest accrues each month, and more of your payment goes toward principal.
📐 Loan Amortization Formula
How to Use the Loan Calculator
Enter the loan amount
Input the total amount you need to borrow — not the item price. If financing a $25,000 car with $5,000 down, enter $20,000.
Set the annual interest rate
Input the APR from your lender offer. Always use APR (which includes fees) for comparisons, not the base interest rate.
Choose the loan term
Select the repayment period. Shorter terms have higher monthly payments but substantially lower total interest — compare this figure carefully across terms.
Review total interest paid
This is the true cost of borrowing. A $25,000 loan at 9.5% over 5 years costs $6,500 in interest alone — a figure that changes significantly with term length.
Fixed vs Variable Rate Loans: Which Is Better?
Fixed-rate loans maintain the same interest rate and payment for the entire term — ideal for budget certainty. Variable-rate loans adjust with a benchmark index (prime rate, SOFR) — lower initially but carrying payment risk if rates rise. For most consumer loans (auto, personal), fixed rates are standard and preferred. For home equity lines of credit (HELOCs) and some student loans, variable rates are common. When comparing fixed vs variable, model the variable rate at its maximum possible cap to understand worst-case payment exposure before choosing.
Comparing Lenders: What Actually Matters
When shopping loans, three figures matter most: the APR (includes all fees), the total interest paid over the full term, and the prepayment penalty terms. A loan with a 0.5% lower APR that has a 2% prepayment penalty is often worse than a slightly higher-rate loan with no penalty — particularly if you expect to pay early or refinance. Get quotes from at least three lenders, including your own bank or credit union, an online lender, and a competing institution. Pre-qualification typically uses a soft credit inquiry and does not affect your score.
How Extra Payments Shorten a Loan: Worked Example
Take a $20,000 loan at 10% APR over 5 years. The standard payment is $424.94, and paying exactly that for all 60 months costs $5,496.45 in total interest.
Now add $100 extra to every payment ($524.94 total), applied directly to principal. Simulating the balance month by month, the loan is fully repaid in about 47 months instead of 60, and total interest falls to roughly $4,162.65 — a saving of $1,333.80 and thirteen months, for committing 24% more per month than required.
Why is the saving disproportionate to the extra amount?
Because every extra dollar applied to principal stops accruing interest for every remaining month of the original term, not just the current one. A $100 extra payment made in month 1 removes interest that would otherwise have compounded across all 59 remaining months; the same $100 paid in month 55 only saves interest for five months. Extra payments made earlier in the loan are mathematically worth more than the identical payment made later — the same principle that governs mortgage prepayment.
How Should You Compare Loan Offers From Different Lenders?
Is APR or interest rate the number to compare?
APR, not the headline interest rate. APR folds in origination fees and other mandatory costs, expressing them as an equivalent rate over the loan's term. A 9% loan with a 3% origination fee typically carries an APR closer to 10.5–11% on a short-term loan — the fee's effect on APR shrinks as the term lengthens, since it's amortized over more payments. Comparing APR-to-APR removes this fee-structure noise entirely.
Does a shorter term always cost less in total?
Yes, at the same rate, because interest has fewer months to accrue — but lenders often price shorter terms lower to begin with, compounding the saving. The trade-off is a higher required monthly payment, so the right term is the shortest one whose payment still leaves comfortable room in the budget, ideally with the option (confirmed in the loan's terms) to pay extra without penalty when cash flow allows.
What is a fixed vs variable rate loan, and which is safer?
A fixed rate locks the same rate for the entire term, so the payment and total interest calculated above never change. A variable rate can reset periodically with a benchmark index — cheaper at signing in most rate environments, but the total-interest math above becomes a moving target. Borrowers with a tight monthly budget generally prefer the certainty of fixed; borrowers planning to repay quickly or refinance soon carry variable-rate risk for less time and may accept it for the lower starting rate.
Frequently Asked Questions
Sources & Methodology
Calculations are based on the most current publicly available data from authoritative government and industry sources: