What Is a Loan Calculator?
A loan calculator computes your monthly payment, total interest, and overall repayment cost for a fixed-rate loan. By entering the loan amount, interest rate, and term, you can quickly compare different borrowing scenarios and plan your budget accordingly.
How to Use This Loan Calculator
- Enter the total loan amount you wish to borrow.
- Input the annual interest rate as a percentage.
- Set the loan term in months (e.g., 360 for 30 years).
- Click “Calculate” to view your monthly payment, total repayment amount, and total interest cost.
Key Concepts
Most fixed-rate loans use amortization, where each payment covers both interest and principal. Early payments are interest-heavy, while later payments apply more toward principal. The monthly payment formula is M = P × [r(1+r)n] / [(1+r)n − 1], where P is the principal, r is the monthly rate, and n is the total number of payments. Understanding amortization helps borrowers see how extra payments reduce total interest.
Frequently Asked Questions
How does the loan term affect total cost?
A longer term lowers monthly payments but increases total interest paid. For example, a 30-year loan costs significantly more in interest than a 15-year loan at the same rate, even though monthly payments are lower.
What is the difference between APR and interest rate?
The interest rate is the cost of borrowing the principal, while APR (Annual Percentage Rate) includes the interest rate plus additional fees and costs, giving a more accurate picture of the true borrowing cost.
Can I pay off my loan early?
Many loans allow early payoff, though some charge prepayment penalties. Making extra payments toward principal reduces total interest and shortens the loan term considerably.