Free Loan Calculator - Monthly Payments & Interest
Calculate monthly payments, total interest, and view complete amortization schedules for any loan amount. Make informed borrowing decisions.
Ways to Save on Your Loan
- 💰 Shop around: Compare rates from 3-5 lenders
- 📊 Improve credit: Higher scores = lower rates
- 💵 Larger down payment: Reduces loan amount needed
- ⏰ Shorter term: Less total interest paid
- 🔄 Extra payments: Pay off principal faster
Common Loan Types
Personal Loans
Unsecured loans for personal expenses. Typical terms: 2-7 years. Rates depend heavily on credit score.
Auto Loans
Vehicle financing secured by the car. Typical terms: 3-7 years. Often lower rates than personal loans.
Home Equity Loans
Borrow against home equity. Fixed rate, lump sum. Interest may be tax-deductible.
Student Loans
Education financing with deferred payments. Federal options often have better terms than private.
The Loan Payment Formula
M = Monthly payment amount
P = Principal (loan amount)
r = Monthly interest rate (annual rate ÷ 12)
n = Total number of payments (term in months)
This is the standard amortization formula used by banks and financial institutions worldwide.
Verified Calculator
Formula source: Standard amortization formula (PMT function)
This calculator uses the industry-standard loan amortization formula used by financial institutions worldwide.
Learn more about our verification processKey Loan Terms Explained
Principal
The original loan amount borrowed, excluding interest
APR (Annual Percentage Rate)
Total yearly cost including interest and fees, used for comparing loans
Amortization
The process of paying off debt through regular payments over time
Secured vs. Unsecured
Secured loans use collateral (lower rates); unsecured don't (higher rates)
Prepayment Penalty
Fee charged by some lenders for paying off the loan early
Frequently Asked Questions About Loans
Monthly loan payments are calculated using the amortization formula: M = P × [r(1+r)ⁿ] ÷ [(1+r)ⁿ-1], where M is the monthly payment, P is the principal (loan amount), r is the monthly interest rate (annual rate ÷ 12), and n is the total number of payments. This formula ensures equal monthly payments throughout the loan term.
The interest rate is the cost of borrowing the principal amount. APR (Annual Percentage Rate) includes the interest rate plus other fees and costs associated with the loan, such as origination fees, closing costs, and discount points. APR provides a more complete picture of the total cost of borrowing and is useful for comparing different loan offers.
Shorter loan terms mean higher monthly payments but less total interest paid over the life of the loan. Longer terms have lower monthly payments but result in more total interest. Consider your monthly budget, financial goals, and the total cost of the loan. A 36-month auto loan will cost less in interest than a 72-month loan for the same amount.
Several factors influence your interest rate: 1) Credit score - higher scores typically get lower rates; 2) Loan amount and term; 3) Type of loan (secured vs. unsecured); 4) Debt-to-income ratio; 5) Employment history and income stability; 6) Current market conditions and Federal Reserve rates; 7) Lender policies and competition.
Loan amortization is the process of spreading loan payments over time through regular installments. Each payment covers both principal and interest, with early payments going mostly toward interest and later payments going mostly toward principal. An amortization schedule shows exactly how each payment is divided and your remaining balance after each payment.
Strategies to pay off loans faster include: 1) Make extra payments toward principal when possible; 2) Round up your monthly payments; 3) Make bi-weekly payments instead of monthly (results in one extra payment per year); 4) Apply windfalls like tax refunds or bonuses to the loan; 5) Refinance to a lower interest rate if available.
Understanding Loan Calculations
A loan calculator is an essential tool for anyone considering borrowing money. Whether you're financing a car, consolidating debt, or covering unexpected expenses, understanding your monthly payment obligations before signing is crucial for maintaining financial health.
Our free loan calculator uses the standard amortization formula employed by banks and financial institutions worldwide. By entering your loan amount, interest rate, and term length, you can instantly see your monthly payment, total interest cost, and the complete payment breakdown.
The amortization schedule shows exactly how each payment is divided between principal and interest. In the early years of a loan, most of your payment goes toward interest. As you progress, more goes toward principal. Understanding this helps you see the benefit of making extra payments to reduce total interest.
Before taking any loan, we recommend comparing offers from multiple lenders, checking your credit score, and ensuring the monthly payment fits comfortably within your budget. A general rule is that all debt payments shouldn't exceed 36% of your gross monthly income.