How loan computation works
For a fixed-rate loan with equal monthly payments, the monthly payment is computed with the standard amortization formula:
M = monthly payment · P = loan amount (principal) · i = monthly interest rate (annual rate ÷ 12) · n = total number of monthly payments.
Early payments go mostly to interest; as the balance falls, more of each payment goes to principal. That is why the yearly balance summary drops slowly at first and faster later. If your rate is 0%, the math is simple: monthly payment = principal ÷ number of months.
How to use this loan calculator
- Enter the loan amount you plan to borrow.
- Enter the annual interest rate as a percentage (for example, 5 for 5%).
- Enter the loan term in years or months, then press Calculate.
- Compare terms: try a shorter term to see how much total interest you save, or a longer term to see how much the monthly payment falls.
Want just the interest part? Try our interest on loan calculator, which shows total interest and total repayment for simple vs compound interest.
Frequently asked questions
How is a loan monthly payment computed?
With the amortization formula M = P × i × (1 + i)n ÷ ((1 + i)n − 1). P is the principal, i is the monthly rate (annual rate ÷ 12), and n is the number of monthly payments. At 0% interest, the payment is simply principal ÷ months.
What is the difference between total interest and total cost?
Total interest is all the interest you pay over the loan's life. Total cost is principal + total interest — everything you pay back in total.
Does a longer loan term mean lower monthly payments?
Yes — but it usually raises total interest, because interest accrues for longer. A shorter term means higher monthly payments and less total interest.
How do I compute interest on a loan separately?
Use our interest on loan calculator for simple vs compound interest totals.
Are these results exact?
They are estimates for planning. Fees, rounding, payment timing, variable rates and lender rules can change real payments. Confirm final figures with your lender.
Is my loan data sent anywhere?
No. All computations run in your browser; nothing you enter is uploaded, stored or tracked.