Loan Calculator

What is a Loan Calculator?

A loan calculator helps you estimate your monthly payments and total cost for any type of loan, including personal loans, auto loans, student loans, and other installment loans. By entering the loan amount, interest rate, and loan term, you can instantly see how much you'll pay each month and how much interest you'll pay over the life of the loan.

How to Use This Calculator

1. Enter Loan Amount: Input the total amount you want to borrow
2. Set Interest Rate: Enter the annual interest rate (APR) offered by your lender
3. Choose Loan Term: Select the repayment period in months or years
4. Review Results: See your monthly payment, total interest, and total loan cost

Understanding Your Results

Monthly Payment

This is the fixed amount you'll pay each month throughout the loan term. It includes both principal (the amount you borrowed) and interest (the cost of borrowing).

Total Interest

The total amount of interest you'll pay over the entire life of the loan. This represents the true cost of borrowing money.

Total Cost

The sum of your principal loan amount plus all interest paid. This is the actual total you'll pay back to the lender.

Principal vs Interest Breakdown

In the early months of your loan, a larger portion of each payment goes toward interest. As you pay down the principal, more of each payment goes toward reducing your balance.

The Formula Behind the Calculation

Monthly Payment Formula: M = P × [r(1+r)^n] / [(1+r)^n – 1]

Where:

• M = Monthly payment
• P = Principal (loan amount)
• r = Monthly interest rate (annual rate ÷ 12)
• n = Total number of payments

Source: Standard amortization formula used by banks and financial institutions worldwide.

Loan Types This Calculator Works For

Personal Loans

Unsecured loans for various purposes like debt consolidation, home improvement, or major purchases. Typically 2-7 year terms.

Auto Loans

Loans specifically for purchasing vehicles. Common terms are 36, 48, 60, or 72 months.

Student Loans

Loans for education expenses. Terms vary widely from 5-25 years.

Small Business Loans

Loans to fund business operations or expansion. Terms depend on the loan type and lender.

Frequently Asked Questions

What's the difference between APR and interest rate?

The Annual Percentage Rate (APR) includes both the interest rate and any fees, giving you the true cost of borrowing. This calculator uses the interest rate; your APR may be slightly higher.

How can I reduce my total interest paid?

• Choose a shorter loan term
• Make extra principal payments
• Look for lower interest rates
• Improve your credit score before applying

What's a good interest rate for a loan?

Rates vary by loan type and your credit score. Personal loans typically range from 6-36%. Auto loans range from 4-20%. The better your credit, the lower your rate.

Should I choose a longer or shorter loan term?

Shorter terms mean higher monthly payments but less total interest. Longer terms offer lower monthly payments but cost more overall. Choose based on your budget and financial goals.

How does my credit score affect my loan?

Higher credit scores typically qualify for lower interest rates, which can save you thousands over the life of the loan.

Important Considerations

• Fees: Some loans have origination fees, prepayment penalties, or other costs not included in this calculation
• Variable Rates: This calculator assumes a fixed interest rate. Variable rate loans may have different monthly payments over time
• Credit Requirements: Your actual rate depends on your credit score, income, and the lender's criteria

Disclaimer: This calculator provides estimates for educational purposes only. Actual rates, payments, and terms may vary. Consult with a qualified financial professional for specific advice.