Free browser-based tool
Loan Calculator
Calculate your monthly loan payment or find out how much you can afford to borrow. Works for mortgages, car loans, personal loans, and any fixed-rate loan. Enter your numbers and get instant results.
Monthly Payment Estimate
$401
Total Interest
$4,046
Total Payoff Amount
$24,046
Two Ways to Use This Calculator
Calculate Payment
You know the loan amount — find out what your monthly payment will be.
- →Enter loan amount, interest rate, and term
- →Get monthly payment, total interest, and total cost
- →Ideal for comparing loan offers side by side
How Much Can I Borrow?
You know your monthly budget — find the maximum loan you qualify for.
- →Enter your monthly budget, interest rate, and term
- →Get maximum borrowing amount and total cost
- →Ideal for planning a purchase before approaching a lender
Loan Payment Formula
Both modes use the standard amortizing loan formula, which calculates a fixed monthly payment for a fixed interest rate:
M = P × r × (1 + r)ⁿ ÷ [(1 + r)ⁿ − 1]
M = Monthly payment
P = Principal loan amount
r = Monthly interest rate (annual rate ÷ 12 ÷ 100)
n = Total number of monthly payments (years × 12)
Worked Example — Calculate Payment
Loan: $20,000 | Rate: 7.5% per year | Term: 5 years (60 months)
r = 7.5 ÷ 12 ÷ 100 = 0.00625 | n = 60
Monthly payment = $401 | Total interest = $4,046 | Total repaid = $24,046
Worked Example — How Much Can I Borrow?
Budget: $500/month | Rate: 7.5% per year | Term: 5 years (60 months)
Maximum loan = $24,953 | Total interest = $5,047 | Total paid = $30,000
How Loan Repayment Works
Every monthly payment is split between interest and principal. The split shifts over the loan term through a process called amortization.
Early Payments
Most of each payment covers interest. The outstanding balance shrinks slowly.
Mid-Term
Interest and principal portions begin to equalize as the balance falls.
Final Payments
Almost all of each payment reduces the principal. The loan clears quickly.
This is why making extra payments early in the loan term saves the most — each extra payment reduces the principal on which all future interest is calculated.
Short Term vs Long Term — Real Cost Comparison
| Loan Term | Monthly Payment | Total Interest | Total Repaid |
|---|---|---|---|
| 2 years | $900 | $1,600 | $21,600 |
| 3 years | $622 | $2,396 | $22,396 |
| 5 years | $401 | $4,046 | $24,046 |
| 7 years | $307 | $5,768 | $25,768 |
Based on a $20,000 loan at 7.5% annual interest. All figures are mathematically exact using the reducing balance formula.
How to Lower Your Total Loan Cost
🏦 Shop for the lowest rate
A 1% reduction on a $20,000 loan over 5 years saves approximately $530 in interest. Compare multiple lenders and credit unions before committing.
💳 Improve your credit score
A score of 750+ qualifies for the lowest rates. Pay bills on time, reduce credit card balances, and avoid new credit applications before applying.
📤 Make extra payments
Any amount above the minimum goes directly to principal, reducing future interest. Even one extra payment per year shortens a 5-year loan by 3–4 months.
📅 Choose the shortest term you can afford
A 2-year term on a $20,000 loan saves $2,446 in interest versus a 5-year term. Use the calculator to find the shortest term within your budget.