How to use this calculator
The calculator updates as you type, so you can try different numbers and compare the results straight away.
- Loan amount: the amount you’re borrowing. If the lender takes an origination fee out of the loan, enter the full amount you’ll repay, not the cash you receive.
- Interest rate (APR): the annual percentage rate from your loan offer. Under the Truth in Lending Act, lenders must show you the APR before you sign, so you’ll find it on your loan estimate or agreement.
- Loan term: how long you have to repay, in years or months. Personal loans usually run 2 to 7 years, and auto loans 3 to 7 years.
- Extra monthly payment (optional): any amount you plan to pay on top of the required payment each month. The calculator applies it straight to the balance, so you can see how much sooner you’ll be debt-free.
The results show your monthly payment, the total interest, the total cost of the loan and your payoff date. Below them, the chart shows how much principal and interest you repay each year, and the schedule shows every payment.
Example: a $20,000 loan at 7.5% APR
Say you borrow $20,000 at 7.5% APR over 5 years (60 months).
| Result | |
|---|---|
| Monthly payment | $400.76 |
| Total interest | $4,045.54 |
| Total cost | $24,045.54 |
In the first month, $125.00 of your payment is interest and $275.76 goes toward the balance. Interest takes a bigger share at the start because the balance is at its highest. Over the first year you pay $1,383.85 in interest, about a third of the total.
Now add an extra $100 a month. Your payment becomes $500.76, the loan is paid off in 47 months instead of 60, and total interest falls to $3,080.99. That’s a saving of $964.55, and every extra dollar still goes toward money you owe anyway.
One thing surprises many people: stretching the same loan to 6 years lowers the payment to $345.80, only $54.96 less a month, but adds $852.22 of interest. Lower payments can cost a lot more in the end.
How it’s calculated
The calculator uses the standard amortization formula that US lenders use for fixed-rate installment loans:
Monthly payment = P × r ÷ (1 − (1 + r)^−n)
- P is the loan amount.
- r is the monthly interest rate: your APR divided by 12, as a decimal. A 7.5% APR gives r = 0.075 ÷ 12 = 0.00625.
- n is the number of monthly payments.
Each month, interest is the remaining balance multiplied by r. The rest of the payment reduces the balance. Any extra payment also comes straight off the balance, which lowers the interest charged the following month. At 0% APR there is no interest, so the payment is simply the loan amount divided by the number of months.
We calculate at full precision and round only for display. The last payment is adjusted so the balance ends at exactly $0. Lenders round each payment to the cent, so your loan schedule may differ from ours by a few cents in total.
The calculator assumes a fixed rate, payments on the same day each month and no fees beyond those included in your APR. Loans with variable rates, deferred payments or daily simple interest can work out slightly differently.
Tips to pay less interest
- Compare APRs, not monthly payments. A lower payment often just means a longer term. Put each offer into the calculator and compare the total cost.
- Choose the shortest term you can comfortably afford. As the example shows, a shorter term saves more interest than almost any rate discount.
- Make extra payments early. Extra money saves the most interest at the start of a loan, when the balance is highest.
- Tell your lender where extra payments go. Ask for extra payments to be applied to principal, not held as an early payment of next month’s bill.
- Check for a prepayment penalty before you sign. If a loan charges one, include it when you compare offers.
- Improve your credit before you apply, if you can wait. Your credit score has a big effect on the APR you’re offered. Try entering a rate 1 or 2 points lower to see what a better score could be worth.
Frequently asked questions
How is a monthly loan payment calculated?
Lenders use the amortization formula M = P × r ÷ (1 − (1 + r)^−n), where P is the amount borrowed, r is the monthly rate (APR ÷ 12) and n is the number of monthly payments. Each payment covers that month's interest first, and the rest reduces the balance.
What is the monthly payment on a $20,000 loan?
At 7.5% APR, a $20,000 loan costs $622.12 a month over 3 years, $400.76 over 5 years or $345.80 over 6 years. Your own payment depends on the rate you're offered, so enter it in the calculator above.
Is a shorter or longer loan term better?
A shorter term means higher monthly payments but much less interest. For $20,000 at 7.5%, a 3-year term costs $2,396.48 in interest and a 6-year term costs $4,897.76. A longer term only makes sense if the lower payment is what keeps your budget safe.
Does paying extra on a loan reduce the interest?
Yes, as long as the extra goes toward principal. Interest is charged on the remaining balance, so every extra dollar cuts future interest. Paying $100 extra a month on $20,000 at 7.5% over 5 years saves $964.55 and clears the loan 13 months early.
What is the difference between APR and interest rate?
The interest rate is the cost of borrowing the principal. The APR adds certain fees, such as an origination fee, and expresses the total as a yearly rate. Use the APR when comparing offers, because it shows more of the true cost.
Can I pay off a personal loan early?
Most personal loans let you, but some charge a prepayment penalty. Check your loan agreement for a prepayment clause, and ask the lender to confirm that extra payments go to principal rather than toward next month's payment.