How loan payments are calculated
Installment loans use the same amortization formula as mortgages: M = P × r / (1 − (1 + r)−n). A $20,000 loan at 7.5% for 60 months costs $400.76 a month and $4,046 in total interest.
How the term changes the cost
| Months | Monthly payment | Total interest | Total paid |
|---|---|---|---|
| 24 | $899.99 | $1,600 | $21,600 |
| 36 | $622.12 | $2,396 | $22,396 |
| 48 | $483.58 | $3,212 | $23,212 |
| 60 | $400.76 | $4,046 | $24,046 |
| 72 | $345.80 | $4,898 | $24,898 |
A longer term lowers the monthly payment but increases the total interest you pay — and for car loans it can leave you owing more than the car is worth.
APR vs. interest rate
Many personal loans charge an origination fee deducted from the amount you receive. Enter it in the fee field and the calculator shows the APR — the annual rate that makes your payments equal to the cash you actually received. Use the APR to compare offers.
Before you borrow
- Check your credit score; it largely determines your rate.
- Compare at least three lenders, including credit unions.
- Ask about prepayment penalties if you plan to pay early.
- Keep total debt payments well below 36% of your gross monthly income.
Frequently asked questions
How do I calculate a loan payment?
Use M = P·r / (1 − (1 + r)^−n), where r is the monthly rate and n the number of months — or simply use the calculator above.
What is APR?
The annual percentage rate includes the interest rate plus upfront fees, spread over the loan term, so you can compare loans fairly.
Do extra payments help?
Yes. Extra payments go straight to principal, reducing future interest and shortening the loan.
Is this for fixed-rate loans only?
Yes. Variable-rate loans change over time; test several rates to see a range.