Loan Payment Calculator
Calculate monthly loan payments, total interest, and amortization.
What Is the Loan Payment Calculator?
The Loan Payment Calculator computes the fixed monthly payment for an amortizing loan (mortgage, car loan, personal loan, student loan) and shows the full amortization schedule, how each payment splits between interest and principal reduction over the loan's life.
- ›Monthly payment: uses the standard amortization formula to calculate the fixed payment that pays off principal plus interest in exactly n months.
- ›Amortization table: shows each payment's split between interest and principal, and the running balance, downloadable as CSV.
- ›Extra payment modeling: enter an additional monthly payment to see how early the loan pays off and how much interest is saved.
- ›Total interest summary: displays total amount paid, total interest paid, and interest as a percentage of principal.
- ›Loan presets: one-click scenarios for 30-year mortgage at 7%, 5-year car loan at 5%, 10-year student loan at 6.5%.
- ›Compare rates: enter two interest rates to see the payment difference and total cost difference side by side.
Formula
| Variable | Meaning | Notes |
|---|---|---|
| M | Monthly payment | Fixed for the entire loan term |
| P | Principal (loan amount) | Original amount borrowed |
| r | Monthly interest rate | Annual rate / 12 (decimal) |
| n | Total payments (months) | Years × 12 |
| Total paid | M × n | Sum of all payments |
| Total interest | M×n − P | Total cost above principal |
How to Use
- 1Enter the loan amount (principal P), the amount you are borrowing.
- 2Enter the annual interest rate in percent (the calculator divides by 12 internally for the monthly rate).
- 3Enter the loan term in years (converted to months n = years × 12).
- 4Press Calculate (or Enter) to see the monthly payment M, total payments, total interest paid, and the first few rows of the amortization schedule.
- 5Toggle "Show full amortization table" to see every monthly payment with its interest/principal split and running balance.
- 6Enter an extra monthly payment amount to see how early the loan ends and how much interest you save.
- 7Click Reset (or Escape) to clear all fields.
Example Calculation
Example, $300,000 mortgage at 7% for 30 years
Amortization, First 3 and Last 3 payments
| Payment # | Payment | Interest | Principal | Balance |
|---|---|---|---|---|
| 1 | $1,995.91 | $1,750.00 | $245.91 | $299,754.09 |
| 2 | $1,995.91 | $1,748.57 | $247.34 | $299,506.75 |
| 3 | $1,995.91 | $1,747.12 | $248.79 | $299,257.96 |
| 358 | $1,995.91 | $34.74 | $1,961.17 | $4,025.62 |
| 359 | $1,995.91 | $23.48 | $1,972.43 | $2,053.19 |
| 360 | $1,995.91 | $11.98 | $1,983.93 | $0.00 |
Understanding Loan Payment
How Loan Amortization Works
An amortizing loan has a fixed monthly payment that covers both the interest charge for that month and a portion of the principal. Because the payment is fixed, the split between interest and principal changes each month: as the balance decreases, the interest portion shrinks and the principal portion grows. By the final payment, nearly the entire amount goes toward principal.
The amortization formula M = P·r(1+r)ⁿ/[(1+r)ⁿ−1] is derived by setting the present value of n equal monthly payments equal to the loan principal. It ensures the balance reaches exactly zero at the last payment, no balloon payment, no leftover balance.
The True Cost of Interest
Most borrowers focus on the monthly payment and underestimate the total interest cost. On a typical 30-year mortgage:
- ›At 7%, a $300,000 loan costs $418,529 in interest, 1.4× the original principal.
- ›At 4%, the same loan costs $215,608 in interest, still 72% of the principal.
- ›At 8%, total interest reaches $489,714, 1.6× the principal.
This is why mortgage rate differences of 0.5–1% represent enormous amounts of money over 30 years. And it is why paying off a mortgage early (by making extra principal payments) saves disproportionately, you eliminate all future interest that would have accrued on that principal.
Impact of Extra Payments
- ›Adding $100/month extra on a $300,000, 30-year loan at 7% saves ~$66,000 in interest and pays off 4 years 7 months early.
- ›Adding $200/month extra saves ~$115,000 in interest and pays off 8 years early.
- ›Making one extra payment per year (13 instead of 12) on a 30-year mortgage pays it off in ~26 years.
- ›Extra payments applied to principal are most effective early in the loan (when they prevent the most future interest).
Types of Loans This Formula Applies To
- ›Fixed-rate mortgages: the classic 30-year and 15-year home loans; r and M are fixed for the entire term.
- ›Auto loans: typically 36–72 month terms; same amortization formula applies.
- ›Personal loans: typically 2–7 years, often at higher rates (8–25%).
- ›Student loans: federal loans typically 10-year standard repayment; income-driven plans work differently.
- ›NOT applicable to: adjustable-rate mortgages (ARM), monthly rate r changes; interest-only loans, no principal reduction in the initial period; balloon loans, large lump-sum payment at end; credit cards, minimum payment changes each month.
Frequently Asked Questions
How is the monthly interest payment calculated?
Each month, interest is charged on the remaining balance, not the original principal:
- ›Interest this month = Current balance × Monthly rate (annual rate ÷ 12)
- ›Principal this month = Monthly payment − Interest
- ›New balance = Old balance − Principal paid
Early in the loan, the balance is large so most of the payment is interest. As the balance shrinks month by month, the interest portion decreases and the principal portion grows. The word "amortize" comes from French "amortir", to kill off debt gradually, which describes this process exactly.
What happens if I pay extra on my loan each month?
Extra payments go entirely to principal, which reduces next month's interest charge, which means more of the regular payment also goes to principal, creating a compounding acceleration effect.
The effect is non-linear and front-loaded: extra payments early in the loan save far more than the same payments made late, because early principal reduction prevents interest from compounding on that balance for many years. On a 30-year mortgage:
- ›$100 extra/month can save ~$30,000–$60,000 in interest and cut 3–5 years off the term
- ›$200 extra/month can save ~$50,000–$100,000 and cut 6–9 years
- ›One extra full payment per year pays off a 30-year mortgage in ~26 years
What is the difference between APR and interest rate?
The nominal interest rate (note rate) is the rate used in the amortization formula to calculate monthly payments. It reflects only the interest charge on borrowed money.
APR (Annual Percentage Rate) includes the interest rate plus all fees (origination fees, closing costs, discount points, mortgage insurance) expressed as an annual rate, it represents the true total cost of borrowing. APR is always ≥ the nominal rate. US law (Truth in Lending Act) requires lenders to disclose APR. Use the nominal rate to calculate payments; use APR to compare the total cost across different loan offers.
Is a 15-year mortgage better than a 30-year mortgage?
A 15-year mortgage has a higher monthly payment but dramatically lower total interest cost, and typically a lower interest rate (lenders charge less for shorter-term risk). At $300,000 borrowed:
- ›30-year at 7%: $1,996/month, $418,000 total interest
- ›15-year at 6.5%: $2,614/month, $166,000 total interest, $252,000 less
The 15-year payment is $618/month higher. Whether that $618 is better used for the mortgage or invested elsewhere depends on your expected investment return vs. the loan's interest rate. If your investments consistently beat 6.5%, the 30-year plus investing the difference may win. For most people, the guaranteed "return" of eliminating mortgage debt makes the 15-year compelling.
What is a balloon payment loan and how is it different?
A balloon loan has regular monthly payments for a set term, followed by a large "balloon" lump-sum payment of the remaining principal at the end. Payments during the term may be interest-only or partially amortizing.
For example, a 7-year balloon mortgage makes regular payments for 84 months, then the entire remaining balance is due at once. Balloon loans offer lower monthly payments but carry significant refinancing risk, if rates rise or you can't refinance when the balloon comes due, you may be forced to sell. They are common in commercial real estate but are generally high-risk for residential borrowers without a clear exit plan.
How does the loan term affect total interest paid?
Longer terms lower monthly payments but dramatically increase total interest. For a $200,000 loan at 7%:
- ›10-year: $2,323/month, $93,256 total interest
- ›15-year: $1,797/month, $152,740 total interest
- ›20-year: $1,551/month, $213,360 total interest
- ›30-year: $1,331/month, $278,992 total interest
The 30-year has a $992/month lower payment than the 10-year, but you pay $186,000 more in total interest. The trade-off is cash flow flexibility versus total cost. Most advisors suggest choosing the shortest term whose payment you can comfortably afford, then making extra payments when possible.
Why do I pay mostly interest at the start of my mortgage?
Because interest is charged on the current balance, and early in the loan that balance is nearly the full principal. With a $300,000 loan at 7%:
- ›Month 1 interest: $300,000 × (7%/12) = $1,750
- ›Monthly payment: ~$1,996
- ›Principal reduction: $1,996 − $1,750 = only $246 (about 12% of payment)
By the final years, the balance is small, so interest is minimal and almost the entire payment reduces principal. This front-loaded structure is a mathematical consequence of amortization, not a lender policy. It is precisely why extra payments made early have such an outsized impact: they reduce a large balance on which interest would compound for decades.