Loan Payment & Amortization Calculator
The most comprehensive free loan calculator. Estimate your monthly payments and see a complete amortization schedule for any fixed-rate loan. Perfect for personal loans, student loans, or any other type of financing. Understand the total interest cost and how your payments reduce the principal over time.
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Understanding the Loan Payment Calculator
This calculator is an essential tool for understanding the true cost of borrowing. It allows you to determine the monthly payment and total interest for any type of fixed-rate loan, such as a personal loan, student loan, or other financing. It provides a full, interactive amortization schedule to show you exactly where your money goes with each payment.
The Loan Amortization Formula
The monthly payment (M) is calculated using the standard amortization formula:
M = P [r(1+r)^n] / [(1+r)^n - 1]
- P = The principal loan amount (the amount you borrowed).
- r = Your monthly interest rate (your annual rate divided by 12).
- n = The total number of payments (the loan term in years multiplied by 12).
Amortization Explained
Amortization is the process of paying off debt with a fixed repayment schedule in regular installments over a period of time. Each payment consists of two parts:
- Principal: The portion of the payment that reduces your outstanding loan balance.
- Interest: The portion of the payment that covers the cost of borrowing.
In the beginning of the loan term, a larger portion of your payment goes towards interest. As you continue to make payments, more and more of each payment goes towards the principal. Our amortization schedule (available by clicking the 'View Amortization Schedule' button) shows you this breakdown for every single payment. This tool is similar to our more specialized Mortgage Calculator.
Loan Term vs. Total Interest
A key tradeoff in any loan is the loan term. A longer term (e.g., 10 years) results in lower monthly payments, making it more manageable for your budget. However, it also means you will pay significantly more in total interest over the life of the loan. Conversely, a shorter term (e.g., 5 years) has higher monthly payments, but saves you a substantial amount of money on interest.