Loan Calculator

How Loan Interest Works

When you take out a loan, you repay the principal (amount borrowed) plus interest. Each monthly payment covers the interest accrued that month, with the remainder reducing your principal.

Types of Loans This Calculator Handles

• Personal loans: Typically 6-36% APR, 1-7 year terms
• Auto loans: Typically 4-10% APR, 3-7 year terms
• Student loans: Federal 4.99-7.54%, private 3-14%
• Business loans: Typically 6-30% APR

The Power of Extra Payments

Even small extra payments dramatically reduce total interest. On a $25,000 loan at 8.5% for 5 years:

• Minimum payment: $514/month, total interest $5,830
• +$50/month extra: Pay off 5 months early, save $463
• +$100/month extra: Pay off 10 months early, save $893

How to Use the Loan Calculator

1. Enter your loan amount — the principal you plan to borrow (e.g., $20,000 for a car loan).
2. Set the annual interest rate — enter the APR quoted by your lender. For variable-rate loans, use the current rate.
3. Choose the loan term — the number of years to repay. Common terms are 3–7 years for auto loans, 5–15 for personal loans, and 10–30 for student loans.
4. Click "Calculate" to see your monthly payment, total interest paid, and total cost of the loan.
5. Compare scenarios — adjust the term and rate to see how they affect monthly payments and total interest. Shorter terms mean higher payments but less interest.

Understanding Loan Interest and Amortization

Most personal, auto, and student loans use amortization — equal monthly payments that cover both principal and interest over the loan term. The monthly payment is calculated using the formula: M = P × [r(1+r)^n] ÷ [(1+r)^n − 1], where M is the monthly payment, P is the principal, r is the monthly interest rate (annual rate ÷ 12), and n is the total number of payments (years × 12). Early in the loan, most of each payment goes toward interest; as the principal shrinks, more goes toward paying down the loan.

The annual percentage rate (APR) represents the yearly cost of borrowing, including interest and certain fees. A lower APR means lower total borrowing costs. Your credit score heavily influences the rate you're offered — borrowers with excellent credit (760+) may qualify for rates 5–10 percentage points lower than those with fair credit (620–660). Even a 1% difference in APR can save thousands over a long-term loan. For example, on a $25,000 5-year auto loan, the difference between 4% and 6% APR is about $1,300 in total interest.

When choosing a loan term, consider the trade-off between monthly affordability and total cost. A longer term (e.g., 72 months vs. 48 months for a car) lowers your monthly payment but significantly increases total interest paid. Some loans allow early repayment without penalties — making extra payments toward principal can save substantial interest and shorten the loan term. Always check for prepayment penalties before signing. For student loans, consider income-driven repayment plans and refinancing options if you have good credit and stable income.