How a loan payment is calculated
Fixed-rate loans use the standard amortization formula: payment = P × r ÷ (1 − (1 + r)−n), where P is the amount borrowed, r is the monthly rate (APR ÷ 12) and n is the number of payments. Early payments are mostly interest. Later payments are mostly principal.
Example: a $25,000 car loan
| Term | APR | Monthly payment | Total interest |
|---|---|---|---|
| 36 months | 7.5% | $777.66 | $2,995.60 |
| 48 months | 7.5% | $604.47 | $4,014.68 |
| 60 months | 7.5% | $500.95 | $5,056.92 |
| 72 months | 7.5% | $432.25 | $6,122.20 |
| 84 months | 7.5% | $383.46 | $7,210.38 |
Shorter term or lower payment?
An 84-month car loan has the smallest payment, but you pay over $2,000 more interest than on a 60-month loan in the example above. You may also owe more than the car is worth for years. If you can afford it, a shorter term usually costs less overall.
APR vs. interest rate
The APR includes the interest rate plus some lender fees, spread over the loan. It is the better number for comparing offers. In the UK and Europe, lenders show a “representative APR”.
Buying a home instead? Use the mortgage calculator, which adds property tax, insurance and PMI.
Loan Payment Calculator FAQs
How do I calculate a monthly loan payment?
Use payment = P × r ÷ (1 − (1 + r)^−n), where P is the loan amount, r is the APR divided by 12 (as a decimal) and n is the number of months. The calculator above does it instantly.
What is the payment on a $30,000 loan for 72 months?
At 7.5% APR it is about $518.70 a month, with about $7,347 in total interest. At 5% APR it would be about $483.15.
Does paying extra reduce my interest?
Yes. Extra payments go toward principal, so less interest builds up afterwards. Ask your lender to apply extra money to principal.
Is this calculator for car loans or personal loans?
Both. It works for any fixed-rate installment loan, including auto, personal, student and boat loans.