How to use the monthly loan payment calculator
- Enter the loan amount (the principal you borrow).
- Enter the APR and the term in years or months.
- Optionally add an extra monthly payment to see how much sooner you would pay off the loan.
How the calculation works
A fixed-rate installment loan is repaid in equal monthly payments. The payment is set so that, after the last payment, the balance is exactly zero. Each month the lender charges interest on the remaining balance (balance × APR ÷ 12); the rest of the payment reduces the principal. That is why early payments are mostly interest and later ones mostly principal.
Extra payments go straight to principal, which reduces every later interest charge. The schedule rounds interest to the cent each month and adjusts the final payment so the balance ends at zero.
Formula
- P
- Loan amount (principal)
- r
- Monthly rate = APR ÷ 100 ÷ 12
- n
- Number of monthly payments
- Bk
- Balance after payment k
Worked examples
$25,000 at 7.5% for 5 years
r = 0.075 ÷ 12 = 0.00625; n = 60. M = 25,000 × 0.00625 ÷ (1 − 1.00625−60) = $500.95. Total interest ≈ $5,057.
First month: interest = 25,000 × 0.00625 = $156.25, so $344.70 goes to principal.
$200,000 at 6% for 30 years
r = 0.005, n = 360 → M = $1,199.10. Over 30 years you would pay about $231,676 in interest.
Assumptions and limitations
- Does not include taxes, insurance, origination fees or PMI that may be part of a real payment (for example on a mortgage).
- Assumes a fixed rate and monthly payments that start one month after the loan begins. Variable-rate loans change over time.
- Some lenders calculate interest daily or round differently, so your statement may differ by a few cents.
Frequently asked questions
How do I calculate a monthly loan payment by hand?
Convert the APR to a monthly decimal rate (APR ÷ 1200), raise (1 + r) to the power −n, subtract from 1, and divide P × r by the result.
Do extra payments really save money?
Yes, on a standard amortizing loan without prepayment penalties. Extra principal reduces the balance that future interest is charged on. Even small amounts can remove months or years from a long loan.
What is the difference between APR and interest rate?
The interest rate is the cost of borrowing the principal; APR also reflects certain fees, expressed as a yearly rate. Use the interest rate stated in your loan documents so the payment matches what your lender charges.
How does a 0% loan work?
With no interest, the payment is the loan amount divided by the number of months, and total interest is zero.