Does this include fees or origination charges?

No. It calculates only principal, interest, and term. Lender fees, origination charges, and prepayment penalties vary by loan and should be added separately.

Is APR the same as interest rate?

Close but not identical. APR includes certain fees; the raw interest rate does not. For accurate comparison, use the APR from each lender's disclosure.

How much can I save by paying extra each month?

On a $20K loan at 7% for 5 years, paying an extra $50/month cuts the term by ~9 months and saves ~$540 in interest. On a $300K mortgage at 7% for 30 years, paying an extra $200/month cuts the term by ~7.5 years and saves ~$120K in interest. The earlier in the loan you pay extra, the more impact (because each extra dollar reduces all future interest charges on that dollar). Use the calculator to find your specific number; results vary widely by rate and term.

Should I take a 5-year or 7-year loan?

Lower monthly payment vs. lower total cost. The 7-year option saves ~$94/month on a $20K, 7% loan, but costs $1,610 more in total interest. If the extra $94/month would force you to skip emergency-fund savings or 401k matching, take the longer term — those have higher returns than the loan rate. If you can comfortably afford the higher payment, the shorter term wins. Generally: take the shortest term you can comfortably afford.

What's a 'good' loan rate in 2025?

Auto loans (60-72 months): 6-9% for excellent credit (740+ FICO), 9-13% for good credit (670-739), 13-20% for fair credit (580-669), 20%+ for subprime. Personal loans: 8-15% for excellent credit, up to 36% for fair credit. Student loans: federal undergraduate 5-7%, federal graduate 6-8%, private varies widely 4-15%. Mortgage rates: 6-7.5% for 30-year fixed in early 2026 (Fed rates expected to drift down). Always shop 3-5 lenders; rates vary 1-2% across lenders for identical applicants.

Should I pay extra each month or refinance?

Refinance if: the new rate is at least 0.75-1% lower than current, you'll stay in the loan long enough to recoup the closing costs (usually 2-4% of loan amount, so 2-3 years break-even), and you're not extending the term significantly (turning a 25-year remaining mortgage into a new 30-year erases the savings). Pay extra if: you have rate stability, you don't want to deal with refi paperwork, or the rate gap is under 0.5%. Many borrowers do both: refinance once, then accelerate payoff with the savings.

Is this loan calculator accurate for my actual loan offer?

Monthly payment will match your lender exactly — both use the same RFC-standard amortization formula. Differences from your Loan Estimate (LE) come from items the calculator doesn't model by default: origination fees ($300-1,500 typical), discount points (1 point = 1% of loan upfront for ~0.25% rate reduction), prepaid interest (interest from closing date to first payment), prepaid escrow (3-6 months of property tax + insurance held in escrow). For a true apples-to-apples comparison: enter your offer's APR (which folds in fees) instead of the rate. If calculator monthly differs from LE by more than $5-10, you've likely entered a different rate or term. Always verify against the LE before signing — that's the legally binding number.

How do I calculate a loan payment by hand?

Amortization formula: M = P × [r(1+r)^n] / [(1+r)^n - 1]. P = loan principal, r = monthly rate (annual rate ÷ 12), n = total number of monthly payments. Example: $20,000 personal loan at 9% for 5 years. r = 0.09 / 12 = 0.0075. n = 60. (1.0075)^60 = 1.5657. M = 20000 × (0.0075 × 1.5657) / (1.5657 - 1) = 20000 × 0.01174 / 0.5657 ≈ $415/month. Total paid: $415 × 60 = $24,900. Total interest: $4,900. Excel: =PMT(0.09/12, 60, -20000). For each month's split: interest = remaining balance × monthly rate; principal = payment - interest; new balance = old balance - principal. Early months are 70-80% interest; later months flip to 70-80% principal.

What's the best loan term to choose?

Choose the shortest term you can comfortably afford. Why: total interest scales nonlinearly with term. On a $20K loan at 9%: 3-year = $635/month, $2,860 total interest. 5-year = $415/month, $4,900 total interest (71% more interest, 35% lower payment). 7-year = $321/month, $6,950 total interest (143% more interest, 49% lower payment). Decision framework: if the shorter-term payment leaves zero room for emergency-fund contributions or 401(k) match, pick the longer term — those have higher returns than the loan rate saves. If you can comfortably afford the shorter payment and have stable income, pick shorter. Mortgage exception: 15-year vs 30-year is common because the rate is also lower (typically 0.5% less), magnifying the interest savings — but doubles the monthly payment. For auto loans, never go past 5 years (the car depreciates faster than you build equity); for student loans, 10-year standard plan minimizes interest but income-driven plans help cash flow.

Money & Finance · Free tool

Loan Calculator

Work out monthly payments and total interest on any loan. Enter amount, rate, and term — get a clear breakdown in seconds.

Updated June 2026

Loan amount ($)

Rate (%)Term (years)

Extra monthly payment ($) (optional — pays down principal faster)

Monthly payment

$500.95

Total paid

$30,056.92

Total interest

$5,056.92

Payoff date

Jun 2031

Payoff timeline

60 mo

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What it does

A free loan calculator that computes your monthly payment, total paid over the life of the loan, and total interest cost. Enter principal, APR, and term (years); everything updates live. Uses the standard amortization formula — same as any bank calculator.

Before signing any loan agreement, know the full cost. A $20,000 loan at 7% for 5 years costs $3,761 in interest; the same loan stretched to 7 years costs $5,371. Longer terms = lower monthly payment and more total interest. Our debt payoff guide explains strategies to minimize this.

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Example input & output

Input

Principal: $20,000
Rate: 7% APR
Term: 5 years

Output

Monthly payment: $396.02
Total paid: $23,761.44
Total interest: $3,761.44

Stretching the same loan to 7 years drops the payment to $302/mo but increases total interest to $5,371.

How to use it

Enter the loan principal (amount borrowed).
Enter the annual interest rate (APR).
Enter the loan term in years.
Read your monthly payment, total cost, and total interest.

How it works

Key takeaways

The 7-year vs 5-year option drops monthly payment by ~23% but pushes total interest up by ~40%. Always compare total cost, not just monthly.
APR (which folds in lender fees) is the only honest cross-lender comparison. Two loans at the same rate can have very different APRs — and very different real costs.
Extra principal payments yield a guaranteed return equal to your loan rate. On rates above 5%, this typically beats taxable savings on a risk-adjusted basis.
Lenders quote 1-2% rate spread for identical applicants. Always shop 3-5 lenders the same week — rate-shop credit pulls inside 14 days count as one inquiry on your FICO.

Standard amortization formula: M = P × [r(1+r)^n] / [(1+r)^n - 1] where P is principal, r is the monthly rate (APR ÷ 12), and n is the number of monthly payments (years × 12). Every payment covers all interest accrued that month plus a bit of principal; early in the loan most of your payment is interest, later most is principal.

Advanced: APR vs interest rate vs APY

Three terms get confused constantly. Interest rate: the bare number on your loan agreement. APR (Annual Percentage Rate): includes some fees and is the standardized comparison number federal law (TILA, Regulation Z) requires lenders to disclose. APY (Annual Percentage Yield): the effective annual return when compounding is folded in — relevant for savings accounts, not loans. The gap between rate and APR can be 0.1-0.8% on typical mortgage loans (origination fee, points, mortgage insurance fold in). Always compare APR to APR across lenders, never raw interest rates — the lender quoting the lowest rate may have higher APR. See the APR glossary entry for the formal definition.

For complex products (interest-only periods, balloon payments, ARMs), the simple amortization formula doesn’t apply directly. Interest-only loans require separate calculation for the IO period and the post-conversion period; ARMs need rate-projection scenarios. The refinance calculator handles the break-even math for switching loans, and debt payoff calculator handles the extra-principal acceleration math.

How this compares to alternatives

vs Bankrate / NerdWallet: same underlying math; their interfaces push you to apply for partnered lenders, ours doesn’t. vs Excel PMT(): Excel’s built-in =PMT(rate/12, years*12, -loanAmount) gives the same monthly payment number; useful for one-off calcs but slower than a web tool for comparing scenarios. vs lender disclosures: your lender’s Loan Estimate (TRID-mandated 3-page disclosure) is the binding number. Calculator estimates are typically within $1-5/month of LE numbers; if they differ more, the lender has fees you’re not modeling or you have the wrong rate input. Always verify against the LE before signing.

Common mistakes when using this tool

Comparing different terms as if they’re equivalent. A 5-year vs 7-year loan with the same principal and rate aren’t comparable on monthly payment alone — the 7-year costs ~40% more in total interest. Always look at total cost.
Using rate instead of APR for comparison. Lender A at 6% rate with 1.5 points and Lender B at 6.5% rate with no points may have nearly identical APR. Rate alone doesn’t tell you which is cheaper.
Ignoring the prepayment-penalty fine print. Some loans (especially older mortgages and many subprime products) penalize early payoff. Always check for prepayment penalties before using extra-principal strategies.
Stretching term to fit monthly budget. If the monthly payment requires extending to 7+ years, the total cost compounds painfully. Better to buy less car / borrow less / negotiate price than to absorb 2 extra years of interest.
Forgetting opportunity cost. Money spent on extra principal payments could earn 7-10% in stocks (long-term average); a 6% loan rate makes extra principal a 6% guaranteed return. After tax, extra principal usually wins on rates >5%; loses on rates <5%. The compound interest calculator helps run the comparison.

Learn more about loans and amortization

How loan amortization actually works — why early payments are mostly interest, and what that means for prepayment timing.
Secured vs unsecured loans — rate differences, collateral risk, and which loan type fits which need.
APR glossary — the federally-mandated comparison number and why rate alone is misleading.
Amortization glossary — the short definition and the structure of an amortization schedule.

When to use this tool

Any fixed-rate installment loan: auto, personal, student, small business.
Before signing — compare total interest across terms.
When a lender quotes you a payment but not the total cost.

When not to use it

Mortgages with taxes and insurance — use the mortgage calculator (it includes PITI).
Variable-rate loans or credit card debt — use the debt payoff calculator.
Interest-only or balloon-payment loans (different amortization).

Common use cases

Comparing two loan offers from different lenders.
Sanity-checking a car dealership's advertised monthly payment.
Deciding between a 5-year and 7-year loan term.
Estimating interest savings from paying extra each month.

Frequently asked questions

Does this include fees or origination charges?: No. It calculates only principal, interest, and term. Lender fees, origination charges, and prepayment penalties vary by loan and should be added separately.
Is APR the same as interest rate?: Close but not identical. APR includes certain fees; the raw interest rate does not. For accurate comparison, use the APR from each lender's disclosure.
How much can I save by paying extra each month?: On a $20K loan at 7% for 5 years, paying an extra $50/month cuts the term by ~9 months and saves ~$540 in interest. On a $300K mortgage at 7% for 30 years, paying an extra $200/month cuts the term by ~7.5 years and saves ~$120K in interest. The earlier in the loan you pay extra, the more impact (because each extra dollar reduces all future interest charges on that dollar). Use the calculator to find your specific number; results vary widely by rate and term.
Should I take a 5-year or 7-year loan?: Lower monthly payment vs. lower total cost. The 7-year option saves ~$94/month on a $20K, 7% loan, but costs $1,610 more in total interest. If the extra $94/month would force you to skip emergency-fund savings or 401k matching, take the longer term — those have higher returns than the loan rate. If you can comfortably afford the higher payment, the shorter term wins. Generally: take the shortest term you can comfortably afford.
What's a 'good' loan rate in 2025?: Auto loans (60-72 months): 6-9% for excellent credit (740+ FICO), 9-13% for good credit (670-739), 13-20% for fair credit (580-669), 20%+ for subprime. Personal loans: 8-15% for excellent credit, up to 36% for fair credit. Student loans: federal undergraduate 5-7%, federal graduate 6-8%, private varies widely 4-15%. Mortgage rates: 6-7.5% for 30-year fixed in early 2026 (Fed rates expected to drift down). Always shop 3-5 lenders; rates vary 1-2% across lenders for identical applicants.
Should I pay extra each month or refinance?: Refinance if: the new rate is at least 0.75-1% lower than current, you'll stay in the loan long enough to recoup the closing costs (usually 2-4% of loan amount, so 2-3 years break-even), and you're not extending the term significantly (turning a 25-year remaining mortgage into a new 30-year erases the savings). Pay extra if: you have rate stability, you don't want to deal with refi paperwork, or the rate gap is under 0.5%. Many borrowers do both: refinance once, then accelerate payoff with the savings.
Is this loan calculator accurate for my actual loan offer?: Monthly payment will match your lender exactly — both use the same RFC-standard amortization formula. Differences from your Loan Estimate (LE) come from items the calculator doesn't model by default: origination fees ($300-1,500 typical), discount points (1 point = 1% of loan upfront for ~0.25% rate reduction), prepaid interest (interest from closing date to first payment), prepaid escrow (3-6 months of property tax + insurance held in escrow). For a true apples-to-apples comparison: enter your offer's APR (which folds in fees) instead of the rate. If calculator monthly differs from LE by more than $5-10, you've likely entered a different rate or term. Always verify against the LE before signing — that's the legally binding number.
How do I calculate a loan payment by hand?: Amortization formula: M = P × [r(1+r)^n] / [(1+r)^n - 1]. P = loan principal, r = monthly rate (annual rate ÷ 12), n = total number of monthly payments. Example: $20,000 personal loan at 9% for 5 years. r = 0.09 / 12 = 0.0075. n = 60. (1.0075)^60 = 1.5657. M = 20000 × (0.0075 × 1.5657) / (1.5657 - 1) = 20000 × 0.01174 / 0.5657 ≈ $415/month. Total paid: $415 × 60 = $24,900. Total interest: $4,900. Excel: =PMT(0.09/12, 60, -20000). For each month's split: interest = remaining balance × monthly rate; principal = payment - interest; new balance = old balance - principal. Early months are 70-80% interest; later months flip to 70-80% principal.
What's the best loan term to choose?: Choose the shortest term you can comfortably afford. Why: total interest scales nonlinearly with term. On a $20K loan at 9%: 3-year = $635/month, $2,860 total interest. 5-year = $415/month, $4,900 total interest (71% more interest, 35% lower payment). 7-year = $321/month, $6,950 total interest (143% more interest, 49% lower payment). Decision framework: if the shorter-term payment leaves zero room for emergency-fund contributions or 401(k) match, pick the longer term — those have higher returns than the loan rate saves. If you can comfortably afford the shorter payment and have stable income, pick shorter. Mortgage exception: 15-year vs 30-year is common because the rate is also lower (typically 0.5% less), magnifying the interest savings — but doubles the monthly payment. For auto loans, never go past 5 years (the car depreciates faster than you build equity); for student loans, 10-year standard plan minimizes interest but income-driven plans help cash flow.

Show the math + sources

Formula

Same as mortgage: M = P × [r(1+r)^n] / [(1+r)^n − 1]. Remaining balance after k payments: P(1+r)^k − M × [(1+r)^k − 1] / r.

What this assumes

Fixed-rate, fully amortizing loan, monthly payments. No prepayments, no fees rolled into principal, no balloon payments.

Sources

Consumer Financial Protection Bureau — Amortization Explainer

Methodology last verified: 2026-04-30

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