Loan Calculator
Calculate monthly payments for any type of loan
Loan Payment Formula
- M = Monthly payment
- P = Principal loan amount
- r = Monthly interest rate (annual rate / 12)
- n = Number of payments
How to Calculate Your Loan Payment
Understanding your loan payment helps you budget effectively and compare loan offers. Here is how to use this calculator:
- Enter the loan amount — the total principal you want to borrow. This does not include interest or fees.
- Input the annual interest rate — the yearly rate your lender charges. A lower rate means less total interest paid.
- Choose the loan term — how many years you have to repay. Shorter terms mean higher payments but less total interest.
Example: A $20,000 personal loan at 8% interest for 5 years results in a monthly payment of about $405, with total interest of $4,332 over the life of the loan.
Frequently Asked Questions
How do I calculate my monthly loan payment?
Use the loan payment formula: M = P[r(1+r)^n]/[(1+r)^n-1], where P is the principal, r is the monthly interest rate, and n is the total number of payments. Or simply use our loan calculator above — enter your loan amount, interest rate, and term to get your monthly payment instantly.
What is amortization and how does it work?
Amortization is the process of spreading a loan into a series of fixed payments over time. In the early years, most of each payment goes toward interest. As you pay down the principal, more of each payment goes toward the loan balance. By the end of the term, nearly all of your payment goes to principal.
How does interest rate affect my total loan cost?
Even small interest rate differences have a big impact. On a $20,000 5-year loan, a 5% rate costs $2,645 in total interest, while 8% costs $4,332 — a difference of $1,687. Always compare rates from multiple lenders before committing to a loan.
What is the difference between secured and unsecured loans?
Secured loans require collateral (like a car or house), which the lender can seize if you default. They typically offer lower interest rates. Unsecured loans (like personal loans and credit cards) require no collateral but have higher rates since the lender takes on more risk.
Can I pay off my loan early and save on interest?
Yes, making extra payments toward the principal reduces total interest and shortens your loan term. However, some loans have prepayment penalties — check your loan agreement. Even small extra payments can save significant money over the life of the loan.