Loan Calculator

Loan calculations use the standard amortization formula: M = P × [r(1+r)ⁿ] / [(1+r)ⁿ - 1], where M is monthly payment, P is principal (loan amount), r is monthly interest rate (annual rate / 12 / 100), and n is number of payments (years × 12). This formula ensures equal payments throughout the loan term, with early payments weighted toward interest and later payments toward principal.



The calculator converts annual interest rates to monthly rates, then applies the formula to determine fixed monthly payments. Total interest paid equals (Monthly Payment × Number of Payments) - Principal. An amortization schedule breaks down each payment, showing how much goes to principal vs. interest over time, demonstrating how interest portion decreases while principal portion increases.



For additional calculations, the tool can work backwards: given monthly payment and rate, calculate affordable loan amount; or given payment and principal, calculate required interest rate. Early payoff calculations show interest saved by making extra principal payments. All calculations assume fixed-rate loans with constant payments (standard amortization), not variable-rate or interest-only loans.

1. Auto Loan Planning
Calculate monthly car payments before dealer visits to set realistic budgets and negotiate confidently. Compare different loan terms (36, 48, 60, 72 months) to see how term length affects monthly payment and total interest. A $25,000 car at 6% APR costs $483/month for 60 months (total interest $3,980) vs. $402/month for 72 months (total interest $3,944). Shorter terms save interest despite higher monthly payments.



2. Personal Loan Decisions
Evaluate personal loan offers from multiple lenders by comparing monthly payments and total costs. A $10,000 loan at 8% for 3 years costs $313/month (total interest $1,268), while the same loan at 12% costs $332/month (total interest $1,952). Calculate if debt consolidation loans actually save money compared to current payment obligations.



3. Mortgage Affordability
Determine maximum affordable home price based on comfortable monthly payment amount. If you can afford $1,500/month at 7% interest over 30 years, you can borrow ~$225,000. Calculate different scenarios with various down payments (5%, 10%, 20%) to see impact on monthly payments and PMI requirements. Understand true cost of homeownership beyond just purchase price.



4. Student Loan Repayment Planning
Calculate monthly payments for student loans, compare standard vs. extended repayment plans, and determine total interest costs over loan life. A $50,000 student loan at 5% over 10 years costs $530/month (total interest $13,639) vs. $303/month over 20 years (total interest $22,719). Visualize trade-offs between payment amount and total interest paid.



5. Business Financing
Small business owners calculate monthly payments for equipment loans, business expansion loans, or working capital lines of credit. Determine if loan payments fit within cash flow projections. Calculate break-even points where loan-financed equipment generates enough revenue to cover payments plus profit margin. Compare lease vs. loan costs for business assets.

• Shorter terms save significant interest: A $20,000 loan at 7% costs $2,423 interest over 3 years vs. $4,461 over 5 years—nearly double. Even if monthly payments feel tight, shorter terms build equity faster and free you from debt sooner. Calculate both options to see the dramatic interest difference.



• Small rate differences have large impacts: On a $200,000 30-year mortgage, a 6% rate costs $1,199/month while 7% costs $1,331/month—$132/month or $47,520 over loan life. Shop multiple lenders to compare rates. Even 0.25% differences matter. Credit score improvements of 50+ points can lower rates significantly.



• Calculate total cost, not just monthly payment: Dealers/lenders focus on monthly affordability, but total interest paid reveals true cost. A $30,000 car at 4% for 72 months costs $3,780 in interest vs. $1,867 for 48 months—paying $1,913 more for the "lower monthly payment." Focus on total outlay, not just payment size.



• Use amortization schedules to plan extra payments: Amortization schedules show how much principal each payment pays down. Making extra principal payments in early years saves more interest than in later years (since interest is calculated on remaining balance). Even an extra $50-100/month significantly reduces total interest and loan duration.



• Understand the Rule of 78 vs. simple interest: Most modern loans use simple interest (interest charged only on remaining balance), making early payoff beneficial. Some loans use "Rule of 78" or prepayment penalties, negating early payoff savings. Ask lenders about prepayment terms before committing. Simple interest loans allow flexible early payment without penalties.



• Factor in all costs beyond principal and interest: Loan calculators show P&I (principal and interest) but not insurance, taxes, fees, or PMI. For mortgages, add property tax, insurance, HOA fees, and PMI (if down payment <20%). For auto loans, add insurance and registration. Total monthly obligation often exceeds calculated loan payment by 30-50%.



• Compare APR vs. interest rate: APR (Annual Percentage Rate) includes fees, points, and closing costs, giving true borrowing cost. A loan advertised at 6% interest might be 6.5% APR with fees. Compare APRs across lenders, not just interest rates. Lowest interest rate doesn't always mean lowest total cost if fees are high.