How the Loan Calculator Works
This calculator solves the standard fixed-rate amortizing loan formula. You enter three numbers - the loan amount, the annual interest rate, and the term in years - and the calculator returns the fixed monthly payment that pays off the loan in equal installments over that term.
The math behind the result
The formula is M = P[r(1+r)^n] / [(1+r)^n - 1]. P is the principal, r is the monthly interest rate (the APR divided by 12), and n is the total number of monthly payments. For a $25,000 loan at 7.5% APR over 5 years, that works out to about $501 a month and roughly $5,070 in total interest paid.
Use the amortization schedule
The amortization schedule shows you, month by month, how each payment splits between principal and interest. Early in the loan, almost every dollar goes to interest. By the final year, almost every dollar goes to principal. This is why extra payments early in a loan save much more than extra payments at the end.
When this calculator is the right tool
Use it for personal loans, auto loans, business term loans, and student loans. For mortgages, use the Mortgage Calculator since it includes property tax, insurance, and PMI. For credit card payoff with variable balances, the Debt Payoff Calculator handles it better.
How to lower your monthly payment
Three levers move the monthly payment: a lower interest rate, a longer term, or a smaller principal. Lowering the rate is almost always the cheapest of the three. Stretching the term lowers the payment but increases total interest. Reducing the principal means a smaller loan.