How to use the payment calculator
- Choose what you want to find: the monthly payment for a set term, or the time to repay at a payment you pick.
- Enter the loan amount: what you borrow, after any down payment.
- Enter the annual interest rate the lender quotes.
- For a monthly payment, enter the loan term in years or months. For time to repay, enter the monthly payment you can afford.
- Read the payment or payoff time, the total interest, and the year-by-year table of principal, interest and balance.
How the payment is calculated
Most installment loans use standard amortization: the same payment every month, with interest charged on whatever balance is left.
The first formula gives the payment that brings the balance to exactly zero after n months. The second is the same equation solved for n: it tells you how many payments of M it takes. When n isn't a whole number, the calculator rounds up and shows the smaller final payment. At a 0% rate the payment is simply P ÷ n.
Worked example
The calculator starts with $25,000 at 7% for 5 years:
- Monthly rate: i = 0.07 ÷ 12 = 0.0058333, and n = 5 × 12 = 60 payments
- Growth factor: (1.0058333)^60 = 1.41763
- Payment: 25,000 × 0.0058333 × 1.41763 ÷ 0.41763 = $495.03
- Total paid: $495.03 × 60 = $29,701.80, so the interest is $4,701.80
In the first month, $145.83 of the payment is interest (25,000 × 0.0058333) and $349.20 reduces the balance. By the last year, almost all of each payment goes to principal.
Switch to time to repay and pay $550 a month instead. Then P × i ÷ M = 145.83 ÷ 550 = 0.26515, and n = −ln(0.73485) ÷ 0.0058164 = 52.97. That is 52 payments of $550 plus a final payment of $533.26: 4 years 5 months, with total interest of $4,133.26, about $569 less than the 5-year plan.
How the term changes the cost
A longer term lowers the payment but raises the total interest, because the balance stays high for longer. Here is the same $25,000 loan at 7%:
| Term | Monthly payment | Total interest |
|---|---|---|
| 3 years | $771.93 | $2,789.39 |
| 5 years | $495.03 | $4,701.80 |
| 7 years | $377.32 | $6,694.63 |
If you can afford more than the 5-year payment, the time-to-repay mode shows how quickly an extra $50 or $100 a month clears the loan. To find the rate hidden inside a payment a lender quotes, use the interest rate calculator.
What the payment doesn't include
The result is principal and interest only. A car loan payment may also roll in sales tax and fees if you finance them, and a mortgage payment usually adds property tax, homeowners insurance and sometimes mortgage insurance. Use the mortgage calculator for a full housing payment, and check the APR on any offer: an origination fee doesn't change the payment much, but it raises the true cost.
Frequently asked questions
Why is so much of my early payment interest?
Interest is charged on the balance, and the balance is highest at the start. On the $25,000 example, the first payment covers $145.83 of interest, the first payment of year 5 only $33.37, and the last one just $2.87. The payment stays the same, so more of it goes to principal each month.
What happens if my payment is lower than the interest?
The balance would grow instead of shrinking, and the loan would never be repaid. The calculator warns you when a payment doesn't cover the first month's interest. On $25,000 at 7%, any payment of $145.83 or less never clears the debt.
Is a shorter term always better?
It always costs less interest, but the higher payment leaves less room in your budget. A common middle path is to take the longer term and pay extra when you can, provided the loan has no prepayment penalty. Check that the lender applies extra payments to principal.
Does the calculator work for any currency?
Yes. The math is the same for any currency; pick yours in the currency menu and the results use its symbol and format. Lenders in some countries compound differently (Canadian mortgages compound semi-annually, for example), so a quoted payment can differ by a few cents.
Related calculators
- Loan Calculator — Monthly payment, total interest and a full amortization schedule, plus what extra payments save.
- Amortization Calculator — Loan amortization schedule by year, with the payoff date and what an extra monthly payment saves.
- Interest Rate Calculator — Find the annual interest rate hidden in a loan from the amount, the term and the monthly payment.
- Repayment Calculator — How long a balance takes to repay at a fixed payment, or the payment that clears it by your deadline.
Results are estimates for educational purposes and are not financial, tax or legal advice. See our disclaimer.