Loan Payment Calculator
Find your monthly payment and true total cost for any loan amount, rate, and term.
Results
Monthly Payment
$405.53
Total Interest
$4,332
Total Cost
$24,332
Interest Rate
8%
# of Payments
60
Understanding Loan Payments and Amortization
Every loan payment is split between principal (reducing your balance) and interest(the lender's fee). In the early months, most of each payment goes to interest because the balance is high. As you pay down the balance, the interest portion shrinks and more goes to principal. This schedule (called amortization) means you pay the same amount every month, but the composition shifts gradually over the life of the loan.
The monthly payment formula is where P is the loan amount, r is the monthly interest rate, and n is the total number of payments. For a $20,000 loan at 8% over 5 years: r = 0.08/12 = 0.00667, n = 60, and M = $405.53/month. Total paid: $24,332. Total interest: $4,332.
Interest rate has an outsized impact on total cost. That same $20,000 loan at 5% costs $2,645 in total interest. At 12% it costs $6,665, more than 2.5 times as much. For auto loans and personal loans, shopping for even a 1–2% rate reduction can save hundreds to thousands over the loan term.
Making extra payments toward principal shortens your loan and reduces total interest without refinancing. An extra $50/month on a $20,000 loan at 8% over 5 years saves about $400 in interest and pays it off 3 months early. The savings grow even faster on longer or larger loans.
Frequently Asked Questions
What is a good interest rate for a personal loan?
Personal loan rates typically range from 6% to 36% APR depending on your credit score. Borrowers with excellent credit (720+) often qualify for 7 to 12%. Average credit (640 to 720) typically sees 15 to 25%. Rates above 20% should be approached cautiously. At those levels, the total interest cost can equal 40 to 60% of the original loan amount over a 5-year term.
Should I pay off a loan early?
It depends on the rate. If your loan rate is higher than what you could earn investing (roughly 6 to 7%), paying it off early is usually the better mathematical move. If it's lower, like a 3% auto loan, you may be better off investing the extra cash. Always check if your loan has prepayment penalties before making extra payments.
How does a shorter loan term affect total cost?
Shorter terms mean higher monthly payments but dramatically less total interest. A $15,000 auto loan at 7% over 3 years costs $1,638 in interest. Stretched to 5 years, the monthly payment drops by $200 but total interest rises to $2,748, which is $1,110 more. The monthly savings of a longer term often cost more in the long run.
What is the difference between APR and interest rate on a loan?
The interest rate is the cost of borrowing the principal. APR (Annual Percentage Rate) includes the interest rate plus all fees (origination fees, closing costs, points) expressed as an annual percentage. APR is the true cost of the loan. Always compare loans by APR, not just the stated interest rate, especially for personal loans and mortgages that carry origination fees.