🏦 Loan Calculator

What is Loan Calculator?

This loan calculator takes three numbers — amount borrowed, annual interest rate, and term in years — and returns your monthly payment, the total amount you'll repay, and the total interest cost over the life of the loan. It uses the standard fixed-rate amortisation formula, so the result matches what a bank or credit union would quote for a mortgage, car loan, personal loan, or student loan at the same terms. A full amortisation schedule shows exactly how each monthly payment splits between principal and interest for every month of the loan, which is the key to understanding why early payments barely dent what you owe.

How to Use

1. Enter loan amount, interest rate, and loan term
2. See monthly payment update instantly
3. View principal vs interest breakdown

The amortisation formula, explained

Monthly payment on a fixed-rate loan is calculated by: M = P × [r(1+r)n] / [(1+r)n − 1], where P is the principal (amount borrowed), r is the monthly interest rate (annual rate ÷ 12), and n is the number of monthly payments.

Worked example: borrow $30,000 at 6.5 % APR over 5 years. Monthly rate is 0.065 ÷ 12 = 0.005417; number of payments is 60. Plugging in gives a monthly payment of $586.95, a total payback of $35,217, and total interest of $5,217. Drop the rate to 4.5 % and the same loan costs $559.29/month with $3,557 in total interest — a $1,660 saving from a 2-point rate drop.

Why early payments are almost all interest

This is the single most counter-intuitive thing about amortised loans. In month 1 of a 30-year, $400,000 mortgage at 7 %, your $2,661 payment splits roughly $2,333 interest / $328 principal. Only 12 % of your first payment actually reduces what you owe; the rest is the bank renting you the money for that month.

By year 15 of the same loan, the split flips — more of each payment goes to principal. By the final year, nearly all of it does. Implication: any extra principal payment in the early years saves many times its face value in future interest. Use the amortisation schedule to compare scenarios — a single $5,000 extra principal payment in year 2 of a 30-year mortgage can shorten the loan by 6–10 months and save $20,000+ in interest.

What this calculator does not include

This tool computes principal and interest only (P&I). A real monthly housing payment — often abbreviated PITI — also includes:

• Property taxes — typically 1–2 % of home value per year in the US, paid monthly into an escrow account.
• Homeowner's insurance — typically $1,000–$2,500 per year, also escrowed.
• Private Mortgage Insurance (PMI) — required if your down payment is under 20 %; roughly 0.3–1.5 % of the loan amount annually.
• HOA fees — for condos and planned communities, often $200–$600/month.

For auto loans, watch for fees rolled into the loan (document fees, extended warranties), which inflate the principal and therefore your payment. For personal and student loans, check whether interest is capitalised during deferment — that converts unpaid interest into new principal.

Frequently Asked Questions

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