Loan Calculator
Monthly payment, total interest and the full amortization schedule for any fixed-rate loan.
Balance Over Time
Yearly Breakdown
| Year | Principal Paid | Interest Paid | Remaining Balance |
|---|
How Loan Payments Are Calculated
Every fixed-rate loan — auto, personal, student, business, mortgage — uses the same standard amortization formula:
M = P × [ r(1+r)n ] / [ (1+r)n − 1 ]
Where P is the loan amount, r is the monthly interest rate (annual rate ÷ 12), and n is the total number of monthly payments. The result M is a fixed payment that covers both interest and principal until the loan reaches zero. The same formula powers your mortgage calculator, your car payment calculator, and any other fixed-installment loan tool.
Why Early Payments Are Mostly Interest
In the first months of a loan, most of each payment goes to interest because the outstanding balance — and therefore the interest charge — is highest. As the balance shrinks, the interest portion shrinks too and more of each payment goes to principal. That's the "amortization curve" — the gradual shift of the payment from interest-heavy to principal-heavy. Adding even a small extra amount each month attacks principal directly, shortens the payoff time, and saves a meaningful amount of interest.
$25,000 personal loan, 8.5% APR
| Term | Monthly Payment | Total Interest | Total Paid |
|---|---|---|---|
| 3 years | $789 | $3,403 | $28,403 |
| 5 years | $513 | $5,793 | $30,793 |
| 7 years | $397 | $8,346 | $33,346 |
| 10 years | $310 | $12,202 | $37,202 |
Stretching a 5-year loan to 10 years drops the monthly payment by $203 — but more than doubles the total interest. That's $6,400 in extra cost for the convenience of a smaller monthly bill. Take the shortest term you can sustainably afford.
Extra Payments Are a Hidden Superpower
Adding $50 or $100 extra each month — directed entirely at principal — is one of the highest-return things you can do with a small amount of cash, especially on high-interest debt (credit cards, personal loans, private student loans).
Example: On the $25,000 / 8.5% / 5-year loan above, adding $100/month in extra principal pays off the loan in 4 years 1 month instead of 5, and saves $1,200 in interest. The "return" on those extra payments is effectively 8.5% guaranteed — better than most savings accounts and equivalent to long-term stock returns, without any market risk.
APR vs Interest Rate — Why APR Is the Honest Number
The interest rate is what the lender charges on the outstanding balance — the input to the amortization formula. APR (Annual Percentage Rate) includes the interest rate plus origination fees, application fees, and any other required loan costs, expressed as a single annual figure. APR is the apples-to-apples way to compare lenders. A "5.9% interest rate, $1,500 origination fee" loan can have a 6.5% APR — making it more expensive than a competitor's "6.25% rate, no fees."
Loan Types and Typical Rate Ranges
| Loan Type | Typical APR Range | Notes |
|---|---|---|
| Mortgage (30-year fixed) | 6-8% | Lowest because secured by real estate |
| Auto loan (new) | 5-9% | Secured by vehicle |
| Auto loan (used) | 6-12% | Higher than new |
| Student loan (federal) | 5-8% | Subsidized rates set annually by gov |
| Student loan (private) | 5-13% | Credit-dependent |
| Personal loan (unsecured) | 7-25% | No collateral, varies by credit |
| Credit card (revolving) | 18-29% | Highest — always pay off in full |
| Payday loan | 200-500%+ | Avoid at all costs |
Pay Down Debt or Invest?
The classic personal finance trade-off. The math is simple: compare the loan's interest rate to what you'd reasonably earn investing the same money.
- If loan rate > expected investment return (e.g., a 9% personal loan vs an expected 7% stock return), pay down the debt — guaranteed return beats hoped-for return.
- If loan rate < expected investment return (e.g., a 4% mortgage vs an expected 7% stock return), the math favors investing. But guaranteed savings have psychological value many people undervalue.
- If close to a wash, do both — split the extra cash flow.
For high-interest debt above ~8%, paying down nearly always wins. For low-interest debt below ~5%, investing usually wins on math but losing on psychology.
Refinancing — When It Makes Sense
If rates drop substantially after you've taken out a loan, refinancing into a lower-rate loan can save serious money. The rule of thumb: refinance if you can drop your rate by 1%+ and you'll keep the loan long enough to recoup any closing costs. Calculate the break-even months as (total closing costs ÷ monthly savings) — if you'll keep the loan longer than that, refi makes sense.
Common Loan Mistakes
- Negotiating monthly payment instead of total cost. Salespeople love this because they can hide costs by stretching the term. Always negotiate the loan amount and rate separately.
- Skipping the loan disclosure. The federal Truth in Lending statement shows total cost over the life of the loan — read it.
- Co-signing without thinking. If the primary borrower defaults, you're 100% on the hook, and it tanks your credit.
- Carrying credit card debt while saving. Earning 4% in savings while paying 22% on a card is mathematically backwards.
- Falling for "no payments for 12 months" deals. Interest typically accrues during the deferral and gets added to your balance — you end up paying interest on interest.
Frequently Asked Questions
What's the difference between APR and interest rate?
Interest rate is what you pay on the balance. APR adds origination fees and other required costs, expressed as an effective annual rate. APR is the better apples-to-apples comparison between lenders.
Should I pay off the loan early?
If the loan interest rate is higher than what you'd reasonably earn investing the money (~7% long-term for stocks), paying down early is mathematically the better choice. Below that threshold it's closer to a wash and personal preference matters.
Are loan payments tax-deductible?
Mortgage interest is deductible (within limits) on a primary residence in the U.S. Student loan interest is partially deductible. Personal and auto loans are generally not. Always confirm with a tax professional for your situation.
What credit score do I need to get a good rate?
Best rates typically require 740+. Good rates with 700-739. Average rates with 670-699. Below 670, expect significantly higher rates and consider improving credit first.
What if I miss a payment?
Late fees ($25-$50 typical), credit score drop (60-110 points for a 30-day delinquency), and possibly a default if it continues. Contact the lender at the first sign of trouble — they often have hardship programs.
How does loan prepayment work?
Most loans allow prepayment without penalty (check the agreement). To make sure extra goes to principal (not just the next payment), label the payment "principal only" and confirm with the lender.