Loan Calculator
Estimate your loan payments and total interest cost.
Enter values to see the loan amortization.
Enter values to see the results.
M = P[r(1+r)^n]/[(1+r)^n-1]
- Calculate monthly payment
- Calculate total interest
A loan calculator is an essential tool for anyone considering taking on debt. It helps you understand the financial commitment by estimating your monthly payments and showing you the total amount of interest you'll pay over the life of the loan. This allows you to compare different loan options and make an informed decision.
How Loan Calculation Works
The calculator uses a standard formula to determine your monthly payment based on three key factors:
- Loan Amount (Principal): The total amount of money you are borrowing.
- Interest Rate: The annual percentage rate (APR) charged by the lender.
- Loan Term: The number of years you have to repay the loan.
The formula, known as the amortizing loan formula, ensures that each payment is equal and that the loan is fully paid off by the end of the term. The calculator also provides an amortization schedule, which breaks down how each payment is split between principal and interest.
Why is this important?
Understanding your loan details helps you budget effectively and can save you money in the long run. By experimenting with different loan terms or making extra payments, you can see how you might pay off your loan faster and reduce the total interest paid. A shorter loan term typically means higher monthly payments but less total interest, while a longer term results in lower monthly payments but more total interest over time.