How this loan calculator works
Most consumer loans, including personal loans, auto loans and most student loans, are fully amortizing. You pay the same amount every month, and by the last payment the balance is exactly zero. This calculator uses the same formula lenders use to set that payment, so the result should match a quote to within a few cents.
Enter the amount you want to borrow, the APR you were offered and the length of the loan. If the lender charges an origination fee, enter it as a percentage. Many personal loan lenders take this fee out of the money they send you, so you receive less than you borrow but still repay the full amount.
The loan payment formula
Payment = P × r / (1 − (1 + r)−n)
P is the amount borrowed, r is the monthly rate (APR ÷ 12 ÷ 100) and n is the number of monthly payments. Example: $25,000 at 8.9% for 5 years gives r ≈ 0.007417 and n = 60, for a payment of about $518 a month and roughly $6,065 in total interest.
How term length changes the real cost
Stretching a loan out makes each payment smaller, but you pay interest for longer. Here is the same $25,000 loan at 8.9% over different terms:
| Term | Monthly payment | Total interest |
|---|---|---|
| 2 years | $1,141 | $2,383 |
| 3 years | $794 | $3,578 |
| 5 years | $518 | $6,065 |
| 7 years | $401 | $8,681 |
Going from 3 to 7 years cuts the payment roughly in half but more than doubles the interest. Choose the shortest term whose payment you can comfortably afford, and keep an emergency fund so a tight month doesn't lead to a missed payment.
Tips for getting a better loan
- Compare APR, not just the rate. APR includes fees, so it shows the true yearly cost.
- Prequalify with several lenders. Many use a soft credit check that doesn't affect your score.
- Check for prepayment penalties. You want to be able to pay early without being charged.
- Consider autopay discounts. Many lenders take 0.25% off the rate if you pay automatically.
- Borrow only what you need. Every extra dollar borrowed costs interest for the whole term.
Frequently asked questions
What is the difference between APR and interest rate?
The interest rate is the cost of borrowing the principal. APR (annual percentage rate) includes the interest rate plus most lender fees, such as origination fees, expressed as a yearly rate. APR is the better number for comparing offers.
Is a longer loan term always cheaper?
No. A longer term lowers the monthly payment, but you pay interest for more months, so the total cost is almost always higher. Longer terms often carry higher rates too.
Can I pay off a loan early?
Most personal and auto loans allow early payoff, which reduces total interest. Check your loan agreement for any prepayment penalty before making large extra payments.
Results are estimates for educational purposes. Actual terms depend on your lender and credit profile.