Loan Payment Formula
The monthly payment formula
Most fixed-rate loans use an amortizing payment: each monthly payment covers interest first, then pays down principal. The formula is P * r / (1 - (1 + r)^-n), where P is the loan amount, r is monthly interest, and n is the number of months.
Turn annual rate into monthly rate
If the annual rate is 6%, the monthly rate is 0.06 / 12 = 0.005. A five-year loan has 5 * 12 = 60 monthly payments.
Total interest
After you know the monthly payment, multiply it by the number of months to get the total paid. Total interest is total paid minus the original loan amount. This makes longer loan terms easy to compare: the monthly payment may fall, but total interest usually rises.
Use the calculator
Open the Loan Calculator, enter the amount, rate, and years, then compare the monthly payment, total interest, and full repayment cost.
Try the Loan Calculator →Estimate monthly loan payments, total interest and full repayment cost from amount, rate and term. Free online loan calculator.Frequently asked questions
Is this an exact lender quote?
No. It is an estimate. Real offers can include fees, insurance, taxes, variable rates, or different compounding rules.
What happens with a zero-interest loan?
The payment is simply the principal divided by the number of months.