Loan Payment Calculator
Calculate your monthly loan payment for personal loans, auto loans, or any fixed-rate loan using the standard amortization formula.
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Enter loan details to calculate monthly payment.
Formula Explanation
The monthly payment uses the standard amortization formula:
- M: Monthly payment
- P: Loan principal (amount borrowed)
- r: Monthly interest rate (annual rate / 12 / 100)
- n: Total number of payments (years * 12)
Interest is compounded monthly. Each month, interest is calculated on your remaining balance and added to the principal. Your payment then reduces this amount.
How Loan Payments Are Calculated
A standard installment loan — whether a personal loan, auto loan, or any fixed-term loan — is repaid through equal monthly payments over a set term. Each payment covers accrued interest plus a portion of the principal. Early in the loan, most of the payment goes toward interest; later payments shift toward principal as the balance shrinks. This process is called amortization.
The monthly payment is calculated using the standard amortization formula: M = P × [r(1+r)ⁿ] / [(1+r)ⁿ − 1], where P is the loan principal, r is the monthly interest rate (annual rate ÷ 12), and n is the total number of payments.
Loan Term vs. Total Interest Paid
A longer loan term reduces the monthly payment but dramatically increases the total interest paid over the life of the loan. The table below shows how a $20,000 loan at 8% annual interest compares across different terms:
| Loan Term | Monthly Payment | Total Interest |
|---|---|---|
| 2 years | $904 | $1,693 |
| 3 years | $627 | $2,558 |
| 5 years | $406 | $4,332 |
| 7 years | $311 | $6,110 |
How to Use This Calculator
- Enter the loan amount (the total amount you are borrowing).
- Enter the annual interest rate (check your loan agreement or lender quote).
- Enter the loan term in months or years.
- Click Calculate to see your monthly payment, total amount paid, and total interest cost.
Frequently Asked Questions
What is a good interest rate for a personal loan?
Personal loan rates in 2024 range from about 7% for borrowers with excellent credit (720+) to 36% or higher for those with poor credit. Credit unions and online lenders often offer lower rates than traditional banks. Always compare the APR (Annual Percentage Rate), which includes fees, not just the stated interest rate.
Should I choose a shorter or longer loan term?
Choose the shortest term whose monthly payment fits comfortably in your budget. Shorter terms cost significantly less in total interest and get you debt-free faster. If you're unsure, take a slightly longer term for a lower payment — then pay extra each month toward principal when you can, effectively shortening the loan without obligation.
Are there penalties for paying off a loan early?
Some loans include a prepayment penalty — a fee charged if you pay off the loan ahead of schedule. Always check your loan agreement before making extra payments. Many personal loans and student loans have no prepayment penalty, but some auto loans and mortgages may include them, especially in the first few years.