Loan Payment Calculator | Calculate Interest & Amortization

Managing loans is a critical part of personal finance. Whether it’s a home mortgage, car loan, or personal loan, understanding how much you need to pay monthly and how much interest you will incur can save time and money. The Loan Payment Calculator helps you calculate monthly payments, total interest, and the amortization schedule easily and accurately.

Why Use a Loan Payment Calculator?

• Financial Planning: Know your monthly obligations before taking a loan.
• Comparison: Compare different loan amounts, interest rates, and terms.
• Transparency: Understand how interest affects your total payments.
• Time-Saving: Avoid manual calculations and mistakes.

Loan Payment Formula

The standard formula for calculating monthly loan payments is:

P = [r × L] / [1 − (1 + r)⁻ⁿ]

• P – Monthly payment
• L – Loan amount (principal)
• r – Monthly interest rate (annual rate ÷ 12 ÷ 100)
• n – Total number of payments (loan term in months)

How the Loan Payment Calculator Works

1. Enter the loan amount you wish to borrow.
2. Select the annual interest rate.
3. Specify the loan term in years or months.
4. The calculator applies the formula and provides:
• Monthly Payment
• Total Interest Paid
• Total Payment (Principal + Interest)
• Optional: Amortization schedule showing principal and interest breakdown for each month

Step-by-Step Example

Problem: Calculate the monthly payment for a $20,000 car loan at 5% annual interest over 3 years.
Step 1: Convert annual interest rate to monthly: r = 5 ÷ 12 ÷ 100 = 0.004167
Step 2: Total payments: n = 3 × 12 = 36 months
Step 3: Apply formula:

P = [0.004167 × 20000] / [1 − (1 + 0.004167)⁻³⁶]

Step 4: Calculate: P ≈ $599.42 per month
Total Payment: $599.42 × 36 ≈ $21,579
Total Interest Paid: $21,579 − $20,000 ≈ $1,579

Amortization Explained

Amortization breaks each monthly payment into principal and interest portions. Early payments mostly cover interest, while later payments increasingly cover principal. The calculator can generate an amortization table showing the schedule for each month.

FAQs – Loan Payment Calculator

1. What is the difference between principal and interest?
Principal is the amount borrowed; interest is the cost of borrowing that amount over time.

2. Can this calculator handle different compounding periods?
Yes, monthly compounding is standard, but annual or daily can be adjusted if needed.

3. Can I calculate total interest paid?
Yes, the calculator shows total interest over the life of the loan.

4. Is it suitable for mortgages?
Absolutely, it works for any fixed-rate loan including mortgages, car loans, and personal loans.

5. How does loan term affect monthly payments?
Longer terms reduce monthly payments but increase total interest; shorter terms increase monthly payments but reduce total interest.

6. Can I calculate early repayment impact?
Yes, by adjusting the loan term or adding extra payments in the amortization schedule.

7. Does this calculator include fees?
Standard version calculates principal and interest only; fees can be added manually.

8. Can I use it for small or large loans?
Yes, it works for any loan amount.

9. Is it accurate for professional use?
Yes, formulas are standard and widely used in finance and banking.

10. Is this calculator free to use?
Yes, it is completely free and works online in any modern browser.