Loan Payment Calculator

What will a loan really cost you each month — and in total? Enter the amount, rate, and term to find out.

Calculate your loan payment

Enter your numbers and press Calculate. Your monthly payment will appear here.

How a loan payment is worked out

A fixed-rate loan has the same payment every month. That payment is not split evenly between interest and principal. In the early months, most of each payment is interest, because the balance is at its largest. As the balance falls, the interest share falls with it, and more of each payment goes toward the principal. This process is called amortization, and it is why the first year of a loan feels like you are barely making progress on the balance: you are paying mostly interest.

The formula behind the calculator is the standard amortization formula. If P is the loan amount, r is the monthly interest rate (the annual rate divided by 12), and n is the number of monthly payments, the monthly payment is P × r × (1 + r)ⁿ ÷ ((1 + r)ⁿ − 1). You do not need to remember that — the calculator does the arithmetic — but it helps to know what drives the result. Three things matter: how much you borrow, the rate, and the term. Of the three, the term is the one borrowers underestimate most.

A longer term feels cheaper because the monthly payment drops. It is cheaper per month, but it is more expensive in total, because you pay interest for more months on a balance that falls more slowly. A shorter term does the opposite: the monthly payment is higher, which can strain cash flow, but the total interest is much lower. The right choice is not the lowest payment or the lowest total cost in isolation. It is the shortest term whose monthly payment your business can comfortably afford, with room left over for a slow month.

Worked example

Suppose you borrow $25,000 at 6.5 percent annual interest for 5 years (60 monthly payments).

Monthly interest rate: 6.5% ÷ 12 = 0.5417% per month.
Monthly payment: about $489.15.
Total you will pay: $489.15 × 60 = about $29,349.
Total interest: $29,349 − $25,000 = about $4,349.

Now stretch the same loan to 7 years. The monthly payment falls to about $371, which feels like a saving of $118 a month — but the total interest rises to about $6,190. You pay roughly $1,840 more for the privilege of a lower payment. Shorten it to 3 years instead, and the payment rises to about $767 a month, while total interest falls to about $2,600. That is the trade-off in plain numbers: pay more per month now, or pay more in total later.

What this calculator does not include

The result is the payment for the loan itself. It does not include origination fees, late fees, or prepayment penalties, and for a mortgage or auto loan it does not include taxes, insurance, or other escrow costs that a lender may add to the monthly bill. It also assumes a fixed rate. If your loan has a variable rate, the payment can rise or fall when the rate changes, and this calculator cannot predict that. Always read the loan agreement, check whether the rate is fixed or variable, and ask the lender for the APR and the total of all payments before you sign. A small difference in rate can be worth thousands of dollars over the life of a loan — compare at least three offers, with the same term, before you choose. The full guide, How to Calculate a Loan Payment (and the Total Cost of Borrowing), walks through the formula, the amortization pattern, and the questions to ask a lender.

Frequently asked questions

What is the difference between interest rate and APR?

The interest rate is the cost of borrowing the money. The APR (annual percentage rate) includes most lender fees as well, expressed as a yearly rate. When two loans have the same term, the lower APR is usually the cheaper loan, even if the interest rate looks similar.

Does paying extra each month help?

Yes, if your loan allows extra payments without a prepayment penalty. Extra money goes directly toward the principal, which reduces the balance, which reduces future interest. Even $50 extra a month can cut months off a loan and save hundreds of dollars in interest.

Should I choose a shorter or longer term?

Choose the shortest term with a monthly payment you can afford comfortably — not the maximum you can barely afford. Leave room for a slow month, an unexpected expense, or a late-paying client. A loan you can repay in a bad month is a good loan; a loan that only works in a good month is a risk.

Will this payment be exactly what the lender charges?

It should be very close for a fixed-rate loan with no extra fees, but the lender’s figure is the one that counts. Small differences can come from fees, the exact start date, or how the lender rounds. Treat this result as a planning estimate and confirm the payment in writing before you sign.

Disclaimer: This calculator provides an estimate for planning purposes only. It is not financial, tax, or legal advice. Loan terms, rates, and fees vary by lender and by your credit and business situation. Consult a qualified professional before borrowing.