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How to use this calculator#
- Enter the amount you actually receiveSome lenders deduct an origination fee from the advance. If a $25,000 loan carries a 3% fee and $24,250 lands in your account, you still repay on $25,000 — enter $25,000 here, then judge the deal on the APR.
- Use the interest rate, not the APRAPR already spreads fees across the term as an equivalent rate. Feeding it into a payment formula double-counts those fees and inflates the monthly figure. Compare offers on APR, calculate payments on the interest rate.
- Set the term in yearsThe field accepts decimals, so an 18-month loan is 1.5 and a 42-month loan is 3.5. Personal loans usually run 1–7 years; anything longer on an unsecured balance is a warning sign about affordability.
- Compare total interest, not the monthly paymentLenders sell on the monthly figure because a longer term always makes it smaller. On $25,000 at 9%, going from 3 years to 7 saves $393 a month and costs an extra $5,167 in interest.
The formula#
Amortizing loan payment (annuity) formula
M = P × [ r(1 + r)ⁿ ] ÷ [ (1 + r)ⁿ − 1 ]
- M
- Fixed monthly instalment
- P
- Principal — the amount borrowed
- r
- Interest rate per month: the annual rate ÷ 12, as a decimal
- n
- Total number of monthly payments: years × 12
r and n must use the same period. A 9% annual rate over 5 years becomes r = 0.09 ÷ 12 = 0.0075 and n = 60, never r = 9 and n = 5. If the rate is 0%, the formula divides by zero — the payment is simply P ÷ n.
How loan repayments work#
Most personal, auto and student loans are amortizing loans repaid in fixed monthly instalments. Each instalment pays the month's interest first, then reduces the outstanding balance.
A longer term lowers your monthly payment but increases the total interest paid. A shorter term costs more each month but far less overall.
Worked examples#
A $25,000 personal loan over 5 years
Borrowing $25,000 at 9% for a home improvement, repaid over 60 months.
- Monthly rate r = 0.09 ÷ 12 = 0.0075
- Number of payments n = 5 × 12 = 60
- (1 + r)ⁿ = 1.0075⁶⁰ = 1.565681
- M = 25,000 × (0.0075 × 1.565681) ÷ (1.565681 − 1)
- M = 25,000 × 0.01174261 ÷ 0.565681 = 518.96
- Total repaid = 518.96 × 60 = 31,137.53
$518.96 a month, $31,137.53 repaid in total, of which $6,137.53 is interest.
What three percentage points cost
The same $25,000 over 5 years, but priced at 12% because of a thinner credit file.
- At 12%: r = 0.12 ÷ 12 = 0.01, and 1.01⁶⁰ = 1.816697
- M = 25,000 × (0.01 × 1.816697) ÷ 0.816697 = 556.11
- Extra per month = 556.11 − 518.96 = 37.15
- Total interest = (556.11 × 60) − 25,000 = 8,366.67
- Extra interest versus 9% = 8,366.67 − 6,137.53 = 2,229.14
Three extra points adds only $37 a month but $2,229 over the term — which is why an hour spent collecting quotes usually pays better than the loan itself.
Reference tables#
| Rate | 2 years | 3 years | 5 years | 7 years |
|---|---|---|---|---|
| 5% | $438.71 | $299.71 | $188.71 | $141.34 |
| 7% | $447.73 | $308.77 | $198.01 | $150.93 |
| 9% | $456.85 | $318.00 | $207.58 | $160.89 |
| 11% | $466.08 | $327.39 | $217.42 | $171.22 |
| 13% | $475.42 | $336.94 | $227.53 | $181.92 |
| 15% | $484.87 | $346.65 | $237.90 | $192.97 |
Example: $18,000 at 11% over 3 years is 1.8 × $327.39 = $589.30 a month.
| Term | Monthly payment | Total repaid | Total interest |
|---|---|---|---|
| 2 years | $1,142.12 | $27,410.85 | $2,410.85 |
| 3 years | $794.99 | $28,619.76 | $3,619.76 |
| 5 years | $518.96 | $31,137.53 | $6,137.53 |
| 7 years | $402.23 | $33,787.06 | $8,787.06 |
| 10 years | $316.69 | $38,002.73 | $13,002.73 |
Doubling the term from 5 to 10 years cuts the payment by 39% and raises the interest bill by 112%. The lender is selling you time, and time is the expensive part.
| Rate | Monthly payment | Total interest | Interest as % of amount borrowed |
|---|---|---|---|
| 4% | $460.41 | $2,624.78 | 10.5% |
| 8% | $506.91 | $5,414.59 | 21.7% |
| 9% | $518.96 | $6,137.53 | 24.6% |
| 12% | $556.11 | $8,366.67 | 33.5% |
| 15% | $594.75 | $10,684.90 | 42.7% |
| 18% | $634.84 | $13,090.14 | 52.4% |
| 24% | $719.20 | $18,151.95 | 72.6% |
At 24% over five years you repay more than $43,000 on a $25,000 advance. Rates in that range usually mean the loan is being priced for risk, and consolidating into it rarely helps.
Common mistakes#
- Choosing the longest term because the payment looks affordableA 10-year term on $25,000 at 9% feels comfortable at $316.69 a month, but it costs $13,003 in interest against $3,620 over three years. Pick the shortest term whose payment you can survive a bad month with, not the smallest payment on offer.
- Ignoring origination and arrangement feesA 3% origination fee on $25,000 is $750 taken off the top, so you receive $24,250 while repaying the full $25,000. That fee alone lifts the effective cost of a five-year 9% loan to about 10.3% — invisible in the interest rate, visible in the APR.
- Assuming every early repayment saves interestAmortizing loans reward overpayment, but some agreements — particularly older US auto contracts using the Rule of 78s, and UK loans with an early settlement charge — front-load interest or add up to two months' interest as a penalty. Ask for a settlement figure in writing before you overpay.
- Comparing a fixed-rate loan against a variable one on payment aloneA variable rate that starts half a point lower can end several points higher. If your budget cannot absorb the payment at a rate three points above today's, the fixed loan is cheaper in every way that matters.
Frequently asked questions#
Can I use this for a car or student loan?
Yes. Any fixed-rate, fixed-term amortizing loan — auto, personal or student — works with this calculator.
Is APR the same as interest rate?
Not quite. APR includes certain fees on top of the interest rate, so it reflects the true annual cost more completely. Enter your interest rate here for the payment estimate.
Key terms#
- Amortizing loan
- A loan repaid in equal instalments that cover both interest and principal, reaching a zero balance on the final payment date.
- APR (annual percentage rate)
- The interest rate plus compulsory fees, expressed as one yearly percentage. It is the legally comparable figure between lenders, and it is not the number to put in a payment formula.
- Origination fee
- A charge for setting up the loan, usually 1–8% of the amount borrowed, either deducted from the advance or added to the balance.
- Secured vs unsecured
- A secured loan is backed by an asset the lender can seize, which lowers the rate. An unsecured loan is priced on your credit alone and costs more.
- Principal
- The outstanding amount borrowed, excluding interest. Only payments above the interest due reduce it.
- Prepayment penalty
- A fee for repaying early, designed to protect the lender's expected interest. Common on some auto and business loans, banned or capped on many consumer loans.
Sources#
- What is a personal installment loan? — Consumer Financial Protection Bureau
- What is the difference between a loan interest rate and the APR? — Consumer Financial Protection Bureau
- Consumer Credit — G.19 statistical release (average loan rates) — Federal Reserve Board
Figures last checked .
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