Loan Payment Calculator
Calculate monthly loan payments for any loan amount, interest rate, and term. See total interest paid over the life of the loan.
Reviewed by the Calcura editorial team · Last reviewed
- Question
- How do I calculate a loan's monthly payment?
- Answer
- For a fixed-rate amortizing loan, the monthly payment is M = P × [r(1+r)ⁿ] / [(1+r)ⁿ − 1], where P is the loan amount, r is the annual rate divided by 12, and n is the number of months. A $20,000 auto loan at 6% APR for 60 months comes to about $386.66/month. This formula is what U.S. lenders use for mortgages, auto loans, personal loans, and student loans.
▸Show formula & caveatsHide formula & caveats
- Formula
M = P × [r(1+r)ⁿ] / [(1+r)ⁿ − 1]- Caveats
- Covers principal and interest only — add insurance, fees, or escrow separately.
- Assumes a fixed rate. Variable-rate loans recalculate the payment when the rate moves.
- Origination fees and prepaid interest aren't in the monthly number but raise the real cost.
What This Calculator Does
This calculator returns the fixed monthly payment on an amortizing loan given the loan amount, the annual interest rate, and the repayment term in years. It uses the same amortization formula U.S. lenders use, so the output can be compared directly against a lender's disclosure. Use it for mortgages, auto loans, personal loans, or any fixed-rate loan with equal monthly principal-and-interest payments.
When To Use This Calculator
Shopping for a Mortgage
You're comparing multiple mortgage offers and need to see the exact monthly payment difference between a 6.5% and 7% interest rate on a $400,000 loan. This calculator instantly shows you that just 0.5% more costs you an extra $105/month and $37,800 over 30 years.
Planning a Car Purchase
You have a $500 monthly budget for a car payment. Use this calculator to work backwards—enter different loan amounts at current auto loan rates to determine how much car you can actually afford without breaking your budget.
Evaluating Debt Consolidation
You're considering consolidating multiple high-interest debts into one lower-rate personal loan. Calculate the new monthly payment to verify it's actually lower than your combined current payments before proceeding.
Refinancing Decision
Interest rates have dropped and you're wondering if refinancing makes sense. Calculate your new monthly payment at the lower rate, then compare the total interest savings against refinancing costs to determine if it's worthwhile.
How It Works
The loan payment calculator uses the standard amortization formula that financial institutions use worldwide. This formula calculates a fixed monthly payment that ensures your loan is completely paid off by the end of the term. Each payment is split between principal (the amount you borrowed) and interest (the cost of borrowing). In early payments, most goes to interest; in later payments, most goes to principal. This is called amortization. The formula accounts for compound interest, meaning you pay interest on the remaining balance, which decreases with each payment.
Formula
M = P × [r(1+r)^n] / [(1+r)^n - 1] where M = monthly payment, P = principal, r = monthly interest rate, n = number of paymentsReal-World Example
Scenario
Sarah is buying her first home and comparing two mortgage options: a $350,000 loan at 6.5% for 30 years versus the same amount at 7% for 30 years.
Calculation
Option 1: $350,000 at 6.5% = $2,212/month • Total interest: $446,304 Option 2: $350,000 at 7.0% = $2,329/month • Total interest: $488,530
Result
The half-percent difference costs Sarah an extra $117 per month and $42,226 more in total interest. This calculation helped her decide to buy discount points to lower her rate, saving tens of thousands over the loan's life.
Common Mistakes to Avoid
Mistake: Only looking at monthly payment, ignoring total interest
Solution: A 30-year loan may have a lower monthly payment than a 15-year loan, but you'll pay significantly more interest over time. Always check the total interest amount, not just the monthly payment.
Mistake: Not accounting for additional costs (taxes, insurance, PMI)
Solution: For mortgages, add property taxes, homeowners insurance, and PMI if applicable. Your total housing payment could be 30-40% higher than the base loan payment.
Mistake: Forgetting that interest rates compound monthly
Solution: A 6% annual rate doesn't mean you pay 6% total per year—it compounds monthly. The calculator handles this automatically, but understand that's why interest costs more than simple multiplication would suggest.
Mistake: Not considering prepayment opportunities
Solution: Most loans allow extra principal payments. Even $100 extra per month on a $200,000 mortgage at 6.5% saves $40,000 in interest and pays off the loan 7 years early.
Loan Payment vs. Related Calculators
Loan Amortization Calculator
Shows you the complete payment schedule month-by-month, breaking down exactly how much of each payment goes to principal vs. interest over the entire loan term.
DTI Calculator
Calculates your debt-to-income ratio to determine if you qualify for a loan. Lenders typically require DTI under 36% for approval.
Mortgage Calculator
Specialized for home loans, includes property taxes, insurance, and PMI in your total monthly housing payment calculation.
When This Isn't the Right Tool
Credit cards and revolving credit
Use instead: Credit card balances fluctuate and accrue interest daily. Use the credit card payoff calculator for a realistic payoff timeline.
Interest-only or balloon loans
Use instead: Loans with interest-only periods or a lump-sum balloon payment do not follow a standard fully-amortizing schedule. Work from the lender's specific terms and amortization disclosure.
Variable-rate loans
Use instead: This calculator assumes a fixed rate. For ARMs, HELOCs, or variable-rate student loans, run best-case and worst-case rate scenarios separately to bracket the risk.
How to Verify This Calculation
In a spreadsheet, the equivalent formula is =PMT(rate/12, years*12, -principal). The result should match this calculator to the cent. On a real loan, the lender's Truth in Lending Act disclosure (or Loan Estimate for mortgages) shows the same monthly P&I — compare the numbers directly and ask the lender about any discrepancy.
Sources
- Consumer Financial Protection Bureau — Loan basics — Plain-language explanations of APR, amortization, and consumer loan disclosures.
- CFPB — Truth in Lending Act (Regulation Z) — Federal rule requiring lenders to disclose finance charges, APR, and payment schedules.
- Federal Reserve — Consumer Credit (G.19 release) — Monthly U.S. consumer credit statistics including average auto loan and personal loan balances.
Reviewed by the Calcura editorial team · Last reviewed