Loan calculator

What this calculator does

An amortizing loan is repaid in equal monthly payments over a fixed term at a fixed rate. Each payment covers the interest due that month, and whatever is left reduces the balance. This calculator uses the standard payment formula to find that fixed monthly amount, then walks the loan month by month to show the total interest, the real payoff time, and a full schedule of every payment.

How to use it

1. Enter the loan amount (the principal).
2. Enter the nominal annual interest rate as a percentage.
3. Enter the term in years.
4. Leave the extra monthly payment at 0, or enter what you could add each month.
5. Read the monthly payment, total interest, payoff time and — with an extra payment — the interest and time it saves.
6. Switch the schedule between yearly and monthly to see where each payment goes.

A worked example

A 200,000 loan at 6% over 30 years has a monthly payment of about 1,199.10. Left alone it runs the full 360 months: about 431,676 repaid, of which roughly 231,676 is interest. Add 200 a month and the same loan is gone after 252 payments — 21 years instead of 30, about 351,876 repaid, and roughly 79,801 of interest never charged.

How the schedule is built

Every month, interest is the balance times the monthly rate — the annual rate divided by 12. The rest of the payment reduces the balance, so early payments are mostly interest and later ones mostly principal. The last payment is trimmed to whatever is actually left, so the loan closes at exactly zero instead of overshooting. Switching the schedule to yearly adds up the months inside each year and shows the balance standing at the end of it, so both views close on the same number.

What an extra monthly payment does

In this model the extra amount goes entirely to the balance, on top of the scheduled payment, every month. A smaller balance means less interest next month, which frees a little more principal from the payment after that — which is why a modest extra amount can take years off a long loan. The scheduled payment itself never changes; what changes is how many payments there are. Lenders differ here: some apply extra money to the balance as modelled, others hold it against your next instalment, which shortens nothing. Ask before you count on the saving.

Where the interest rate comes from

You enter the rate yourself; the calculator does not look up or fetch a market rate. Use the rate quoted in your offer, and make sure it is the annual rate rather than a monthly one. It is a nominal rate, not an APR: arrangement fees, insurance and other charges are not folded in, so a loan with a low rate and a high fee will look better here than it is.

Common mistakes

• Entering a monthly rate where an annual rate is expected. Use the annual figure; the calculator divides by 12.
• Reading this rate as an APR. Fees are excluded, so two offers at the same rate are not necessarily the same deal.
• Confusing the monthly payment with the total cost. The total paid is every payment added up, which the schedule shows in full.
• Assuming an overpayment automatically shortens the loan. That depends on the lender’s rules, not on the arithmetic.
• Forgetting that fees, insurance, and taxes are not part of this payment.

Where to go next

The amortization calculator is built around the schedule itself if that table is what you came for. For a home loan with a down payment, property taxes and insurance on top, use the mortgage calculator. And when the question is which of several debts a spare monthly amount should go to, the debt payoff calculator answers that instead.

When it's useful

Personal loans, car loans, and mortgages, or any quick check of what a fixed-rate loan costs each month and over its life — and whether rounding your payment up is worth doing.