Loan payment

How this calculator works

This uses the standard amortization formula for a fixed-rate loan, where each payment is the same but the share going to interest shrinks over time. Total interest is everything you pay beyond the amount borrowed. A shorter term raises the monthly payment but usually cuts total interest sharply.

A worked example

The example is a $25,000 loan at 7.5% for 5 years. The payment is $500.95 a month for 60 months. You pay back $30,057 in total, of which $5,057 is interest.

Change only the term and the trade-off appears. Over 3 years the payment rises to $777.66, but interest falls to $2,996. Over 7 years the payment drops to $383.46, and interest climbs to $7,210. The longer loan is $117 a month easier and $2,153 more expensive than the 5-year loan.

How to read your results

The monthly payment is principal and interest only. It does not include fees, insurance, or anything a lender adds on. "Total interest" is the true price of borrowing: everything you pay beyond the amount you received.

Early payments are mostly interest and later payments are mostly principal, even though the payment itself never changes. That is why extra payments early in a loan save more than the same extra payments near the end.

Common mistakes to avoid

• Shopping by monthly payment alone. Almost any payment can be reached by stretching the term. Compare the total interest as well.
• Entering the wrong rate. Use the interest rate for this calculation. The APR a lender quotes also folds in fees, which makes it the better number for comparing offers.
• Ignoring origination fees. A fee taken out of the loan means you receive less than you borrowed but repay the full amount.