Loan Calculator
Calculate your monthly loan payment and see how much interest you'll pay over the life of your loan. Works for personal loans, auto loans, debt consolidation, and more.
Enter Loan Details
How Loan Payments Work
Personal loans and most other installment loans use amortization, which means your monthly payment stays the same, but the split between principal and interest changes over time.
The Loan Payment Formula
Monthly payments are calculated using this formula:
Where:
- M = Monthly payment
- P = Principal (loan amount)
- r = Monthly interest rate (annual rate ÷ 12)
- n = Total number of payments (years × 12)
How Amortization Works
- Early payments: More goes toward interest, less toward principal
- Middle payments: More balanced split between interest and principal
- Late payments: Most goes toward principal, little toward interest
- Result: Loan is fully paid off by the last payment
Tips to Save on Loan Interest
- Make extra payments toward principal when possible
- Choose the shortest term you can afford
- Improve your credit score before applying
- Shop around with multiple lenders
- Consider a co-signer if you have limited credit
- Avoid loans with prepayment penalties
Why Use This Calculator?
Compare True Loan Costs
See the complete picture beyond just monthly payments. Calculate total interest paid over the loan term - often 20-40% of the principal amount on 5-year personal loans. A $20,000 loan at 10% APR costs $4,400 more than at 6% APR.
Evaluate Multiple Loan Types
Compare personal loans, auto loans, debt consolidation, and home improvement loans side-by-side. Each loan type has different typical rates (personal: 6-36%, auto: 4-12%, secured: 3-10%) that dramatically affect affordability.
Determine Affordable Payment Amounts
Calculate whether proposed monthly payments fit your budget before applying. Financial experts recommend loan payments stay below 15-20% of monthly take-home income. See if you qualify before hard credit inquiries.
Understand Interest Rate Impact
Discover how even small rate differences affect total cost. On a $15,000 3-year loan, 8% APR means $470/month ($16,920 total) while 12% APR costs $498/month ($17,928 total) - $1,008 more for 4% higher rate.
Optimize Loan Term Length
Balance monthly affordability with total interest paid. Shorter terms (2-3 years) mean higher payments but less interest. Longer terms (5-7 years) reduce monthly burden but significantly increase total cost.
Plan Debt Consolidation Strategy
Calculate if consolidating multiple debts into one loan saves money. Compare your current payments and rates against a single consolidation loan to see potential monthly savings and total interest reduction.
Step-by-Step Guide
Determine Your Loan Amount
Calculate exactly how much you need to borrow. For purchases, subtract any down payment. For debt consolidation, total all balances you want to combine. Avoid borrowing more than necessary.
Example:
Example: Car costs $25,000, you have $5,000 down = $20,000 loan needed. Or consolidate $8,000 credit card + $7,000 personal loan = $15,000 consolidation loan
Research Current Interest Rates
Check rates from multiple lenders - banks, credit unions, and online lenders. Rates vary widely based on credit score, loan type, and amount. Excellent credit (740+) qualifies for rates 5-10% lower than fair credit (640-699).
Example:
Example: Credit unions average 8-12% for personal loans, while online lenders range 6-36%. Auto loans through dealers: 4-15% vs. direct bank financing: 3-8%
Select Your Loan Term
Choose between shorter terms (lower total interest) or longer terms (lower monthly payments). Most personal loans: 2-7 years. Auto loans: 3-6 years. Balance affordability with minimizing interest paid.
Example:
Example: $15,000 at 9% APR: 3-year = $477/month, $2,172 interest. 5-year = $311/month, $3,660 interest. Save $1,488 with shorter term
Account for Fees and Costs
Include origination fees (1-8% of loan amount), application fees ($25-50), and prepayment penalties if applicable. These add to true loan cost and affect your calculations.
Example:
Example: $10,000 loan with 5% origination fee actually costs you $10,500, not $10,000. Calculate payments on the full amount received, not just principal
Calculate Monthly Payment Impact
Ensure proposed payment fits your budget. Use 28/36 rule: total debt payments (including this new loan) shouldn't exceed 36% of gross monthly income. Leave room for emergencies and other expenses.
Example:
Example: $4,000/month income = max $1,440/month all debt. Current debts $800/month = max $640 available for new loan payment
Compare to Current Debt Costs
For consolidation or refinancing, calculate total current monthly payments and interest rates. Only consolidate if new loan has lower rate and reduces either monthly payment or total interest paid.
Example:
Example: Three current debts: $200 at 18%, $150 at 22%, $180 at 15% = $530/month, $98,000 total interest. Consolidation at 12%: $475/month, $7,100 interest saves $23 monthly + $890 total
Factor in Your Credit Score
Your credit score determines eligibility and rates. Excellent (740+): best rates. Good (670-739): competitive rates. Fair (580-669): higher rates, limited options. Poor (<580): very high rates or secured loans only.
Example:
Example: $15,000 5-year loan - Excellent credit: 7.5% APR, $300/month. Fair credit: 18% APR, $381/month. That's $4,860 more over loan life
Review Total Interest Paid
Don't just look at monthly payment - examine total interest over loan term. This reveals true cost and helps you decide if borrowing makes financial sense compared to saving up.
Example:
Example: $20,000 at 12% for 5 years = $4,448 total interest paid. Ask: Is convenience of having money now worth $4,448 premium?
Test Extra Payment Scenarios
Calculate how extra payments reduce interest and loan term. Even small additional amounts make significant impact. Many loans allow extra payments without penalties.
Example:
Example: $15,000 at 10% for 4 years = $381/month. Add $50/month extra saves $558 in interest and pays off 7 months early
Verify Loan Fits Financial Goals
Ensure new debt aligns with broader financial picture. Consider impact on debt-to-income ratio, credit utilization, and ability to save for emergencies and retirement. Don't borrow if it prevents other critical goals.
Example:
Example: $400/month loan payment might be affordable, but prevents $500/month employer 401k match. That costs you $1,000+/month in lost retirement funds
Expert Tips & Strategies
Check Multiple Lenders for Best Rates
Rates vary dramatically between lenders. Credit unions often offer 1-3% lower rates than banks. Online lenders provide fast approvals but sometimes higher rates. Get quotes from 3-5 lenders within 14-day window to minimize credit score impact from multiple inquiries.
Improve Credit Score Before Applying
Wait 3-6 months to boost your score if possible. Pay down credit card balances below 30% utilization, fix report errors, and avoid new credit inquiries. A 40-point increase can lower your rate by 2-4%, saving thousands over loan term.
Consider Secured Loans for Lower Rates
If you have assets (car, savings, home equity), secured loans offer 3-7% lower rates than unsecured personal loans. But understand the risk - you could lose the collateral if you default. Only use if confident in repayment ability.
Choose Shortest Term You Can Afford
Every year shorter you go dramatically reduces total interest. If you can afford 10-15% higher monthly payment, choose 3-year over 5-year term. The interest savings often equal 1-2 monthly payments, plus you're debt-free faster.
Avoid Origination Fees Over 3%
Many lenders charge 1-8% origination fees, effectively increasing your APR by that amount. Shop for lenders with low or no origination fees. A 5% fee on $10,000 loan ($500) equals 1% higher APR over a 5-year term.
Read Fine Print on Prepayment Penalties
Some lenders charge fees if you pay off early, negating savings from extra payments. Always ask about prepayment penalties before signing. Avoid loans with these penalties - you want flexibility to pay off faster if circumstances improve.
Don't Borrow More Than Needed
Lenders often approve you for more than requested. Stick to your actual need. Every extra $1,000 borrowed at 10% costs $127-212 in interest over 3-5 years. Borrowing "just in case" is expensive - save separately for emergencies instead.
Calculate True APR Including All Fees
Advertised rate doesn't include origination fees, application fees, or insurance. Calculate true cost by adding all fees to total interest paid. This reveals actual cost and enables fair comparison between lenders.
Common Mistakes to Avoid
Focusing Only on Monthly Payment
Many borrowers make decisions based solely on whether they can afford the monthly payment, without considering the total interest cost over the loan's life. A $50 lower monthly payment over 7 years might actually cost you $3,000 more in interest than a 5-year loan with slightly higher payments.
✓ Better approach: Always calculate and compare total interest paid over loan life, not just monthly payment. Use our calculator to compare different loan terms side-by-side and look at the complete financial picture including total cost.
Not Shopping Around for Rates
Rate differences of 2-5% are common between different lenders, even for borrowers with identical credit profiles. Many people go with their bank without comparing, leaving thousands on the table.
✓ Better approach: Get quotes from at least 3-5 lenders including banks, credit unions, and online lenders. On a $15,000 5-year loan, a 3% rate difference means $1,200 more in interest. Spending 2-3 hours getting quotes is effectively earning $400-600/hour in savings.
Extending Loan Terms Too Long
Longer loan terms create lower monthly payments but dramatically increase total interest paid. A 7-year loan might seem affordable at $250/month, but you'll pay nearly double the interest of a 4-year loan.
✓ Better approach: Choose the shortest term you can comfortably afford. Even reducing a 7-year loan to 5 years can save $2,000-3,000 in interest. Your future self will thank you for paying less in interest and being debt-free sooner.
Ignoring Fees in Cost Calculations
A 5% origination fee on a $10,000 loan means you actually receive only $9,500 but must pay back $10,000 plus interest. Many borrowers focus solely on interest rate and ignore these significant upfront costs.
✓ Better approach: Always factor fees into total cost and compare net proceeds, not just advertised rates. Calculate APR (which includes fees) or add origination fees to total interest to see true cost. Sometimes a slightly higher rate with no fees is cheaper overall.
Borrowing Before Improving Credit
Credit scores significantly impact loan rates. Borrowing with a 650 score at 18% when 6 months of credit work could increase it to 720 and qualify for 12% rates is a costly mistake.
✓ Better approach: Unless it's an emergency, spend 6 months improving your credit before borrowing. Increasing your score 50-80 points can lower rates by 3-6%. On a $20,000 loan, that's $2,000-4,000 saved - worth the wait.
Using Loans for Depreciating Assets
Borrowing at 12-18% for vacations, weddings, or consumer goods that provide zero financial return is one of the most expensive financial mistakes. These purchases create long-lasting payments for short-lived experiences.
✓ Better approach: Loans make sense for appreciating assets (education, home) or essential needs (reliable car for work, debt consolidation at lower rate). For discretionary purchases, save up instead. If you can't afford to save for it, you can't afford the loan payments either.
Not Reading Loan Agreement Carefully
Prepayment penalties, variable interest rates, balloon payments, mandatory insurance requirements, and other costly terms often hide in fine print. Many borrowers only discover these issues after signing.
✓ Better approach: Read every page of the loan agreement before signing. Ask your lender to explain anything unclear. Look specifically for prepayment penalties, rate adjustment clauses, balloon payments, and required insurance. One missed clause can cost thousands.
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Frequently Asked Questions
How is my monthly loan payment calculated?
Your monthly payment is calculated using the loan amount, interest rate, and loan term. The formula distributes the total amount (principal + interest) evenly across all payment periods, ensuring the loan is fully paid off by the end of the term.
What types of loans can I calculate?
This calculator works for personal loans, auto loans, debt consolidation loans, home improvement loans, and most other fixed-rate installment loans. It does not apply to credit cards or lines of credit with variable payments.
Should I choose a shorter or longer loan term?
Shorter terms have higher monthly payments but significantly lower total interest. Longer terms have lower monthly payments but cost more in interest over time. Choose based on your budget and how quickly you want to be debt-free.
What is a good interest rate for a personal loan?
Personal loan rates typically range from 6% to 36%, depending on your credit score. Excellent credit (720+) may qualify for 6-10%, good credit (680-719) for 10-15%, and fair credit (640-679) for 15-25%. Always shop around for the best rate.
Can I pay off my loan early?
Most loans allow early payoff, but some have prepayment penalties. Check your loan agreement. Paying extra toward principal reduces total interest and shortens the loan term, saving you money.
Financial Disclaimer
This calculator is provided for educational and informational purposes only. The results are estimates based on the information you provide and should not be considered as financial, legal, or tax advice.
Actual results may vary based on your specific circumstances, market conditions, and other factors. Always consult with qualified financial, legal, and tax professionals before making any financial decisions.
We make no guarantees about the accuracy, completeness, or reliability of the calculations. Use this tool at your own risk.