Loan Calculator
Enter the loan amount, the annual interest rate, and the loan term to instantly estimate your monthly payment, the total cost of the loan, and the total interest you'll pay.
How is the monthly payment calculated?
This calculator uses the standard amortization formula, the same one most banks use for fixed-rate loans (personal loans, auto loans, standard mortgages). It spreads the repayment of the principal and the payment of interest over the entire loan term, so that every monthly payment stays the same from the first month to the last.
M = P × [r(1+r)ⁿ] / [(1+r)ⁿ - 1]
Where M is the monthly payment, P is the borrowed principal,r is the monthly interest rate (annual rate divided by 12 and by 100), andn is the total number of monthly payments (the loan term expressed in months).
A Concrete Example
Let's take a loan of 10,000 at an annual rate of 5%, repaid over 24 months. The monthly rate is 5 / 12 / 100 ≈ 0.004167. Applying the formula, the monthly payment comes out to about 438.50. Over the full term, the borrower repays roughly 10,524 in total, meaning about 524 in interest. The longer the term, the higher the total interest paid, even though individual monthly payments are smaller.
Nominal rate vs. APR: what's the difference?
The annual interest rate used in this calculator is the nominal rate, meaning the rate used directly to calculate interest on the outstanding principal. The APR(annual percentage rate) is a more complete indicator: on top of the nominal rate, it includes the loan's additional costs (origination fees, borrower's insurance, guarantees, and so on). The APR is therefore usually higher than the nominal rate and better reflects the real cost of a loan. This calculator does not use the APR: it relies solely on the nominal rate you enter, to illustrate how amortization works.
Frequently asked questions
What affects the amount of interest paid?
Three main factors: the borrowed amount, the interest rate, and the loan term. A larger principal produces more interest in absolute terms. A higher rate increases the interest cost for the same amount and term. Finally, extending the term lowers the monthly payment but increases the total interest paid over the life of the loan.
Why does a longer term cost more overall?
Because interest is calculated each month on the remaining principal. The longer the term, the more months it takes to pay off the principal, so more interest accumulates over time, even though each individual payment is smaller.
Does this calculator replace an actual loan offer?
No. This result is purely informational and based on a standard mathematical formula. It does not account for origination fees, borrower's insurance, guarantees, or the specific conditions offered by a lender. For an actual project, always request a personalized offer and consult a financial advisor or your bank before committing.