Loan Calculator
Turning a Borrowed Sum Into a Monthly Number
A loan offer usually comes as three separate figures — the amount, the rate, the term — and it takes a bit of arithmetic to see what those combine into on a monthly statement. That arithmetic is a standard amortization formula: it spreads the loan balance across every payment so that each one covers that month's interest plus a slice of principal, with the balance reaching exactly zero on the final payment.
The Formula
Where M is the monthly payment, P is the principal (loan amount), r is the monthly interest rate (annual rate ÷ 12 ÷ 100), and n is the total number of monthly payments (term in years × 12). If the rate is zero, the calculator simply divides the principal evenly across the term.
Where This Comes Up
- Comparing lender quotes — two lenders rarely quote the same rate and term together, so converting each offer into a monthly payment is the only fair way to compare them.
- Budgeting before you borrow — checking whether a payment fits your monthly budget before signing, not after.
- Personal, auto, and student loans — any installment loan that amortizes on a fixed schedule uses this exact formula, regardless of what it's financing.
- Seeing the cost of a longer term — a lower monthly payment from stretching the term almost always means paying more in total interest.
How Term Length Changes the Numbers
On a $20,000 loan at a 7% annual rate, stretching the repayment period lowers the monthly payment but raises the total interest paid:
| Term | Monthly Payment | Total Paid | Total Interest |
|---|---|---|---|
| 3 years | $617.54 | $22,231.51 | $2,231.51 |
| 5 years | $396.02 | $23,761.44 | $3,761.44 |
| 7 years | $301.85 | $25,355.70 | $5,355.70 |
Figures are computed with the formula above; actual loan terms may add fees or round payments differently.
How to Use This Calculator
- Enter the Loan Amount you're borrowing (the principal).
- Enter the Annual Interest Rate as a percentage.
- Enter the Loan Term in years.
- Select Calculate to see the monthly payment, total amount paid, and total interest over the life of the loan.
Related Calculations
For a full year-by-year breakdown of principal and interest, see the Amortization Schedule Calculator, or check the APR Calculator to see how fees affect the true borrowing cost.