Loan Calculator

How This Loan Calculator Works

A loan is an agreement where a lender gives a borrower a sum of money (the principal) that gets paid back over time, usually with interest added. This calculator handles the type most people mean by "loan" in everyday conversation: an amortized loan, where a fixed payment is made on a regular schedule until the balance is fully paid off. Enter a loan amount, interest rate, and term, and it returns your monthly payment along with the total interest and total cost over the life of the loan — covering personal loans, debt consolidation, business loans, and more, not just the specific loan types with their own dedicated calculators elsewhere on the site.

Worked Example

A $20,000 loan at 7.5% APR over 5 years comes out to $400.76/month — $24,045.54 total, including $4,045.54 in interest.

The Formula

M = P × [r(1 + r)ⁿ] ÷ [(1 + r)ⁿ − 1], where P is the loan amount, r is the monthly interest rate (annual rate ÷ 12), and n is the number of monthly payments (years × 12). This is the standard fixed-rate amortization formula — every payment is the same size, but the mix of principal and interest within it shifts over time as the balance shrinks. This calculator always compounds monthly, which is standard for most consumer loans.

Understanding Your Interest Rate

Nearly every loan carries interest — it's how lenders profit from extending credit. The rate you're quoted is usually an APR (annual percentage rate), which is meant to reflect both the interest rate and certain fees, unlike a bare interest rate figure. A shorter term generally means a higher monthly payment but noticeably less total interest, since the balance gets paid down faster and has less time to accrue interest — while a longer term spreads payments thinner but costs more overall. See the Compound Interest Calculator for how compounding works on a growing balance, as opposed to one being paid down.

What Changes Your Total Interest

• Interest rate — the single biggest lever; even a percentage point matters over several years
• Loan term — a shorter term means a higher monthly payment but dramatically less total interest, since the balance is paid down faster
• Loan amount — interest scales roughly proportionally with how much you borrow
• Extra principal payments — any payment beyond the required minimum reduces the balance interest is calculated on, cutting total interest even if you don't change the required monthly payment

Secured vs. Unsecured Loans

Loans generally fall into one of two categories. A secured loan is backed by collateral — an asset the lender can legally seize if you default, such as the home behind a mortgage or the vehicle behind an auto loan. Because the lender's risk is lower, secured loans are typically easier to qualify for and carry lower rates. An unsecured loan (personal loans, credit cards, most student loans) has no collateral behind it, so lenders lean on creditworthiness instead — often summarized as the "five C's of credit": Character (credit history and track record), Capacity (ability to repay, often measured against income), Capital (other assets available as a fallback), Collateral (applicable to secured loans only), and Conditions (the loan's purpose and the broader lending environment). With nothing to repossess, unsecured loans tend to carry higher rates, lower limits, and shorter terms than secured ones.

Common Mistakes

• Comparing loans by monthly payment alone — a longer term can look more affordable month-to-month while costing significantly more in total interest.
• Not checking whether the rate is fixed or variable — this calculator assumes a fixed rate for the full term; a variable rate loan's payment can change.
• Ignoring origination fees — some lenders charge an upfront fee that effectively raises the loan's true cost beyond what the stated APR alone suggests.

For a loan tied to a specific home purchase, use the Mortgage Calculator instead — it separates out the down payment. For a vehicle purchase, including trade-in and sales tax, see the Auto Loan Calculator. To see the full year-by-year breakdown of principal versus interest, try the Amortization Calculator.