How is a loan payment calculated?

Using the amortization formula: payment = P × [r(1+r)ⁿ] ÷ [(1+r)ⁿ − 1], where P is the loan amount, r is the monthly interest rate, and n is the number of monthly payments.

Does a lower monthly payment always mean a cheaper loan?

No — a lower monthly payment usually comes from a longer term, which means paying interest for more months and often a higher total cost overall.

What's the difference between this and the Mortgage Calculator?

The math is the same, but the Mortgage Calculator also factors in a home price, down payment, property tax, insurance, and HOA dues — this calculator is for any generic loan amount.

Loan Calculator

Calculate the monthly payment, total interest, and total cost for any fixed-rate loan — personal, business, or any other lump-sum loan.

Loan amount

Loan term (years)

Interest rate

Monthly Payment

$304.15

Total Interest

$3,248.75

Total Paid

$18,248.75

How It Works

The payment formula

Monthly payment is calculated using the standard amortization formula, based on the loan amount, the monthly interest rate, and the number of monthly payments over the loan term.

Total interest

Total interest is simply the total of all payments over the life of the loan minus the original loan amount — the longer the term, the more total interest you'll pay even if the monthly payment is lower.

Example Calculation

A $15,000 loan over 5 years at 8% interest has a monthly payment of about $304, for a total cost of roughly $18,249 — about $3,249 in total interest.

Common Mistakes

Only comparing monthly payments between loans without comparing total interest paid.
Forgetting that a longer term lowers the monthly payment but increases total interest.
Entering the interest rate as a decimal (0.08) instead of a percentage (8).

Frequently Asked Questions

How is a loan payment calculated?: Using the amortization formula: payment = P × [r(1+r)ⁿ] ÷ [(1+r)ⁿ − 1], where P is the loan amount, r is the monthly interest rate, and n is the number of monthly payments.
Does a lower monthly payment always mean a cheaper loan?: No — a lower monthly payment usually comes from a longer term, which means paying interest for more months and often a higher total cost overall.
What's the difference between this and the Mortgage Calculator?: The math is the same, but the Mortgage Calculator also factors in a home price, down payment, property tax, insurance, and HOA dues — this calculator is for any generic loan amount.