Payment Calculator
Payment Tips
- •Lower rates mean lower monthly payments
- •Shorter terms mean higher payments but less interest
- •Extra payments reduce total interest paid
- •Compare multiple scenarios before deciding
Related Calculators
Understanding Loan Payments
The Payment Formula
Fixed-rate loan payments are calculated using an amortization formula that ensures each payment covers the interest due plus a portion of the principal, with the loan fully paid off by the end of the term.
M = P × [r(1+r)n] / [(1+r)n - 1]
- M = Monthly payment
- P = Principal (loan amount)
- r = Monthly interest rate (annual rate / 12)
- n = Total number of payments
Four Calculation Modes
Calculate Payment
Find your monthly payment given the loan amount, interest rate, and term. Most common use case when shopping for loans.
Calculate Loan Amount
Determine how much you can borrow based on the payment you can afford. Useful for budgeting before shopping.
Calculate Interest Rate
Find what rate you are paying (or need) given the other variables. Helpful when comparing offers or checking existing loans.
Calculate Term
Determine how long it will take to pay off a loan with a given payment. Useful for payoff planning.
Impact of Each Variable
| Variable | Increase Effect | Decrease Effect |
|---|---|---|
| Loan Amount | Higher payment, more interest | Lower payment, less interest |
| Interest Rate | Higher payment, much more interest | Lower payment, less interest |
| Loan Term | Lower payment, more total interest | Higher payment, less total interest |
| Monthly Payment | Faster payoff, less interest | Slower payoff, more interest |
Example Scenarios
How different loan terms affect a $25,000 loan at 6.5% interest:
| Term | Monthly Payment | Total Interest | Total Paid |
|---|---|---|---|
| 36 months | $766 | $2,567 | $27,567 |
| 48 months | $593 | $3,456 | $28,456 |
| 60 months | $489 | $4,364 | $29,364 |
| 72 months | $420 | $5,291 | $30,291 |
Key Insight
Extending the loan from 36 to 72 months reduces the monthly payment by $346 but costs an additional $2,724 in total interest. Always balance monthly affordability against total cost when choosing a loan term.
Frequently Asked Questions
How is a monthly loan payment calculated?
Monthly payments use the amortization formula: M = P x [r(1+r)^n] / [(1+r)^n - 1], where M is payment, P is principal, r is monthly interest rate (annual rate/12), and n is number of payments. This formula ensures equal payments that fully repay principal and interest by the end of the term.
How does loan term affect my payment?
Longer terms mean lower monthly payments but much higher total interest. For a $25,000 loan at 6.5%, a 36-month term costs $766/month with $2,567 interest. A 72-month term drops to $420/month but costs $5,291 in interest - more than double. Balance affordability against total cost.
Can I calculate how much I can borrow based on payment?
Yes, by rearranging the payment formula. If you can afford $500/month at 6% for 60 months, you can borrow about $25,800. This is useful for budgeting - decide your comfortable payment first, then determine your maximum loan amount.
Why does a small rate change matter so much?
Interest rate affects every payment for the life of the loan. On a $30,000 loan for 5 years, 6% APR costs $4,800 in interest while 8% APR costs $6,500 - a $1,700 difference from just 2%. On mortgages, this difference can be tens of thousands of dollars.