💳 Loan Payment Calculator
Calculate fixed monthly loan payments, total interest fees, and total payoff costs.
Working out a fixed monthly payment, and working backwards from one
Most borrowing questions arrive in one of two shapes. Either you know what you want to borrow and need to know the payment, or you know what you can afford each month and need to know how much that buys. The same formula answers both; you just solve it for a different unknown.
payment = P × r / [ 1 − (1 + r)−n ]
P is the amount borrowed, r is the periodic interest rate and n is the number of payments. Rearranged for the amount, it becomes P = payment × [ 1 − (1+r)−n ] / r. The second form is the one worth knowing: it turns a budget into a borrowing limit.
From a budget to a loan size
Suppose you can commit $450 a month and lenders are quoting 8% over five years. That buys $22,195. At 10% it buys $21,180; at 6%, $23,281. Two percentage points move your buying power by about $1,000 on a loan this size, which is far less than most people assume. The term moves it much more: the same $450 over seven years at 8% buys $29,620.
| Term | At 6% | At 8% | At 10% |
|---|---|---|---|
| 3 years | $14,795 | $14,355 | $13,934 |
| 5 years | $23,281 | $22,195 | $21,180 |
| 7 years | $31,066 | $29,620 | $27,160 |
Stretching the term raises what you can borrow but raises the total interest faster. Over seven years at 8%, that $450 payment costs $8,180 in interest; over three years it costs $1,845.
Payment frequency
If payments are weekly or fortnightly rather than monthly, divide the annual rate by the number of periods in a year and count the periods the same way. Fifty-two weekly payments at an annual 8% means a weekly rate of 8% / 52 = 0.1538%. The resulting total interest is slightly lower than the monthly equivalent, because you are reducing the balance more often, but the difference is small: on a $20,000 five-year loan it is about $80.
The part the payment hides
A fixed payment is reassuring precisely because it does not move, which means it tells you nothing about how the debt is progressing. Two loans with identical $400 payments can have wildly different balances after two years if their rates differ. Always look at the total repaid alongside the monthly figure, and run the schedule if the loan matters.
A worked example
You are quoted $18,500 over 48 months at 7.4%. The payment is $446.12. Over the term you repay $21,414, so the interest is $2,914, about 15.8% of what you borrowed. If you could stretch to $520 a month, the loan clears in 40 months and the interest falls to $2,414, a saving of $500 for eight fewer months of commitment.
Frequently Asked Questions (FAQs)
Why does my lender's payment differ from this calculator?
Usually because the quote includes fees, insurance or a different day-count convention. Ask for the APR and the total amount repayable; those two numbers make any two offers comparable regardless of how the payment is built.
What is the difference between this and the loan calculator?
Very little in the maths. This one is framed around the payment itself, including working backwards from an affordable monthly figure to a loan size. The loan calculator leads with total cost and comparison between offers.
Should I choose the lowest monthly payment I am offered?
Not by itself. The lowest payment almost always comes from the longest term, which is the most expensive option overall. Pick the shortest term whose payment leaves you comfortable, not the smallest payment available.
Does an extra payment reduce my monthly amount?
Normally no. Overpayments shorten the term rather than reduce the instalment, unless you specifically ask the lender to recast the loan. Recasting recalculates the payment over the remaining term from the new, lower balance; not every lender offers it and some charge for it.
How do balloon payments change the calculation?
A balloon loan amortises as if the term were longer, then demands the remaining balance as a lump sum at the end. The monthly payment is lower but you must refinance or sell to clear the balloon. This calculator assumes the loan fully amortises, so it will not match a balloon structure.
Can I use this for a lease?
No. A lease payment is based on depreciation plus a money factor, not on amortising a loan, so the arithmetic is different. Use it for anything with a fixed balance, a fixed rate and equal payments that clear the debt.