What is a loan payment calculator?
A loan payment calculator computes your fixed monthly payment for personal loans, car loans, student loans, and consumer credit. Enter any loan amount, interest rate, and term to instantly see your monthly payment, total interest, and full repayment schedule. For home purchase financing, use the Mortgage Calculator instead — it takes home price and down payment as inputs.
How is a loan payment calculated?
This calculator uses the annuity formula, where the monthly payment remains the same throughout the loan term. Formula: M = P × r × (1+r)^n / ((1+r)^n – 1), where P is the loan amount, r is the monthly interest rate (annual rate ÷ 12 ÷ 100), and n is the total number of months (years × 12).
What is the difference between APR and nominal interest rate?
The nominal interest rate is the base cost of borrowing, expressed as a percentage per year. APR (Annual Percentage Rate) is a broader measure that includes the nominal rate plus fees — origination charges, processing costs, and administrative fees. Because APR captures the full cost, it is always equal to or higher than the stated nominal rate. When comparing loan offers from different lenders, use APR rather than the nominal rate to get a like-for-like comparison. This calculator uses the nominal interest rate: for loans with no fees, results will closely match APR; for loans with significant origination fees, the effective APR may be 1–3 percentage points higher.
Annuity vs linear repayment — what is the difference?
The annuity method means equal monthly payments throughout the term — at the beginning, a larger portion goes to interest, while at the end, more goes toward repaying the principal. The linear method means equal principal portions each month, resulting in higher initial payments but lower total interest.
How much can I borrow for a given monthly payment?
Rearrange the annuity formula to find your maximum borrowing capacity: P = M × ((1+r)^n − 1) / (r × (1+r)^n), where M is your target monthly payment, r is the monthly interest rate (annual rate ÷ 12 ÷ 100), and n is the number of months. Example: $500 per month, 8% annual rate, 5-year term → r ≈ 0.00667, n = 60, maximum loan ≈ $24,700. The same budget at 12% yields only ≈ $22,450 — showing how rate differences significantly affect how much you can borrow.
How can you reduce the cost of a loan?
You can reduce loan costs by choosing a shorter term (less interest), comparing offers from multiple lenders, or refinancing an existing loan at better terms. Consider not just the interest rate but also origination fees and prepayment penalties. To grow savings alongside debt reduction, our FIRE calculator can show how aggressively saving while paying off loans accelerates long-term financial independence.
When should I use the loan payment calculator vs the mortgage calculator?
Use this loan payment calculator for any fixed-amount borrowing — personal loans, car loans, student loans, or consumer credit — where you enter the exact loan amount. Use the Mortgage Calculator when buying a home: it calculates your loan amount from home price and down payment percentage, and shows a detailed amortization schedule.