Loan Payment Calculator
A loan payment calculator helps you determine your monthly payment amount for any type of loan—whether it's for a car, personal loan, student loan, or business financing. By entering your loan amount, interest rate, and loan term, you'll instantly see how much you need to pay each month, how much interest you'll pay over the life of the loan, and the total amount you'll repay. Understanding these numbers before you borrow helps you make smarter financial decisions and avoid taking on more debt than you can comfortably afford.
Calculator
How We Calculate This
Formula
M = P × [r(1+r)^n] / [(1+r)^n - 1], where M = monthly payment, P = principal, r = monthly interest rate, n = number of months
Step-by-Step
- 1. Convert your annual interest rate to a monthly rate by dividing by 12
- 2. Apply the standard amortization formula: M = P[r(1+r)^n]/[(1+r)^n-1]
- 3. Calculate total amount paid by multiplying monthly payment by number of months
- 4. Calculate total interest by subtracting the principal from total paid
Assumptions
- Fixed interest rate for the entire loan term
- Equal monthly payments (amortizing loan)
- No fees, insurance, or additional costs included
- Payments made on time each month
Methodology
This calculator uses the standard amortization formula used by banks and financial institutions worldwide. The formula is based on the time value of money principle, ensuring that each payment covers accrued interest plus a portion of the principal.
Sources
- Federal Reserve - Consumer Credit
- Consumer Financial Protection Bureau (CFPB) - Understanding Loan Terms
- IRS Publication 936 - Home Mortgage Interest Deduction
Frequently Asked Questions
How is the monthly loan payment calculated?
We use the standard amortization formula: M = P[r(1+r)^n]/[(1+r)^n-1], where P is the principal (loan amount), r is the monthly interest rate (annual rate ÷ 12), and n is the total number of monthly payments. This formula ensures each payment covers both interest and principal, with the loan fully paid off by the end of the term.
Does this calculator include fees or insurance?
No, this calculator shows only principal and interest payments. For mortgages, you'll need to add property taxes, insurance (PMI, homeowners), and HOA fees separately. For auto loans, consider adding gap insurance or extended warranties manually.
Can I use this for a mortgage?
Yes, the formula is the same for mortgages and loans. However, our dedicated Mortgage Calculator includes additional fields for property tax, insurance, and PMI for a complete monthly housing cost estimate.
What if I make extra payments?
Extra payments reduce your principal faster and save on interest. This calculator assumes standard monthly payments. For scenarios with extra payments, consider making additional principal payments each month.
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About this Calculator
This calculator is for informational purposes only. Results are estimates. See our disclaimer.