How to use the loan calculator
- 1Enter the loan amount and the yearly interest rate (APR).
- 2Enter the loan term in years or months.
- 3Optionally add an extra monthly payment.
- 4Read the monthly payment, total interest and payoff time, and open the schedule for details.
How the payment is calculated
Most personal loans, car loans and mortgages are amortizing: every monthly payment is the same, and each one covers that month's interest plus some of the balance. The payment is:
payment = P × r ÷ (1 − (1 + r)^−n)
where P is the amount borrowed, r the monthly interest rate (APR ÷ 12) and n the number of months. In some countries this is called the EMI (equated monthly installment).
Why interest is front-loaded
Early on the balance is large, so most of each payment goes on interest. As the balance falls, more goes towards the principal. The chart shows this shift year by year.
Extra payments
Paying a little extra each month goes straight to the balance, which cuts the interest charged from then on and shortens the loan. Check that your lender does not charge early repayment fees.
What is not included
Fees, insurance, taxes and variable rates can change the real cost. Compare loans using the APR and total amount repayable from the lender's official quote.
Frequently asked questions
What is APR?
The annual percentage rate is the yearly cost of borrowing. Official APR figures often include some fees, so they can be higher than the headline interest rate.
Does a longer term save money?
A longer term lowers the monthly payment but usually increases the total interest paid.
Can I use this for a mortgage?
Yes, for a fixed-rate repayment mortgage. Property taxes, insurance and fees are not included.
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