How this loan calculator works
A fixed-rate loan is repaid with equal payments. Each payment is split in two: the interest owed for that period, and the rest, which reduces what you still owe. Early on, most of the payment is interest because the balance is high; towards the end almost all of it is principal. Laid out payment by payment, that split is the amortisation schedule, and it is what this calculator builds for you.
At a glance
- The payment is fixed; the split between interest and principal shifts every period.
- Total interest is the true cost of the loan, and the number to compare across offers.
- Extra payments go straight to principal and shorten the term.
- Schedule totals are rounded to the cent each period, exactly as lenders do.
The calculator takes the amount you borrow, the annual interest rate, the term and how often you pay, then works out three things: the regular payment, the total interest over the life of the loan, and the date you will make the final payment. Add an extra amount each period and it recalculates the whole schedule so you can see exactly how much sooner the loan ends and how much interest you avoid.
The formula
Payment = P × r ÷ (1 − (1 + r)^−n)
For a monthly loan the rate per period is the annual rate divided by 12. A 7% annual rate becomes 0.5833% a month. For biweekly payments divide by 26, for weekly by 52. When the rate is 0% the formula breaks down (you cannot divide by zero), so the payment is simply the amount divided by the number of payments.
Worked example: the default loan
Borrow $20,000 at 7% for 5 years, paid monthly.
Rate per month: 7% ÷ 12 = 0.58333%. Number of payments: 5 × 12 = 60.
Payment = 20,000 × 0.0058333 ÷ (1 − 1.0058333−60) = $396.02.
First month: interest is 20,000 × 0.0058333 = $116.67, so $279.35 goes to principal and the balance falls to $19,720.65. Over 60 payments you repay $23,761.44 in total, of which $3,761.44 is interest, about 16 cents of every dollar you pay.
Reading the schedule
Switch between By year and Every payment above the table. The yearly view is the quickest way to see the shape of the loan: interest falls each year while the principal portion grows. The per-payment view shows every line the way a lender's statement would, including the running balance, and it is what the CSV download contains.
Two details worth knowing:
- The last payment is rarely identical to the others. Because each payment is rounded to the cent, a few cents of rounding accumulate over the term. The final payment settles the exact remaining balance, so it may be a few cents more or less.
- Two totals for interest. The figure beside the table is the sum of the rounded interest lines, what you would actually pay. Under the table we also show the "formula" total (payment × number of payments − amount borrowed) that most other calculators headline. They differ by less than a dollar on typical loans.
Extra payments: the cheapest way to cut interest
Anything you pay beyond the scheduled payment goes straight to principal. That matters because next period's interest is charged on a smaller balance, and the effect compounds for the rest of the loan.
Worked example: $200 extra a month
A $200,000 loan at 6% over 30 years costs $1,199.10 a month and $231,677 in interest.
Add $200 a month and the loan is paid off after 252 payments instead of 360, nine years early, with total interest of $151,876. That is $79,801 saved for an extra $200 a month.
Before you overpay, check two things with your lender: that extra payments are applied to principal (not held as a prepayment of next month's instalment), and whether an early-repayment charge applies. Most personal loans and US mortgages allow penalty-free prepayment, but some fixed-rate products do not.
Monthly, biweekly or weekly?
Changing the frequency here recalculates a true payment for that schedule: 26 biweekly or 52 weekly payments a year. The total interest is slightly lower than monthly because the balance is reduced a little sooner each month, but the difference is modest, on the $200,000 example, biweekly saves about $213 over 30 years.
| Frequency | Payments a year | Payment | Total interest ($200,000 at 6% for 30 years) |
|---|---|---|---|
| Monthly | 12 | $1,199.10 | $231,677 |
| Biweekly | 26 | $553.17 | $231,464 |
| Weekly | 52 | $276.53 | $231,370 |
The well-known "biweekly trick" that saves far more is a different thing: paying half your monthly payment every two weeks. Because there are 26 half-payments a year, you make the equivalent of 13 monthly payments instead of 12, and that thirteenth payment is what shortens the loan. To model it, keep the frequency on monthly and enter one-twelfth of your payment as the extra payment.
What the calculator does not include
- Fees. Origination or arrangement fees are not part of the interest calculation. If your lender quotes an APR that includes fees, use that rate for a closer estimate of the true cost.
- Variable rates. The rate is assumed fixed for the whole term. For a variable or tracker loan, run the calculator at a few rates to see the range of payments you might face.
- Insurance and add-ons. Payment-protection or credit insurance is a separate cost.
- Daily-interest quirks. Some lenders charge interest daily rather than monthly, which makes payments in 31-day months slightly higher. The differences are small and even out over a year.
Using the result
The payment is the number that has to fit your budget every period without fail. The total interest is the number that tells you what the loan really costs, and the one to compare across offers with different terms: a longer term lowers the payment but almost always raises the total interest. If you are choosing between offers, put each one through the calculator with the same amount and compare total interest side by side, then decide how much a lower payment is worth to you.