Loan Calculator — Monthly Payment & Total Interest

Work out your monthly payment on any loan — auto, personal, or student. Enter the principal (amount borrowed), the annual interest rate, and the term in years.

How this calculator works

The standard formula is M = P × (r(1+r)ⁿ) / ((1+r)ⁿ - 1), where M is monthly payment, P is principal, r is monthly interest rate (annual / 12), and n is number of months.

Frequently asked questions

How does the loan term affect total interest?

A 5-year loan at 7% on $25,000 costs about $4,700 in total interest. The same loan over 3 years costs about $2,700 in interest but the monthly payment is $775 instead of $495. Shorter terms save thousands in interest but require higher monthly cash flow. The 3-year loan costs $775/month versus $495/month for the 5-year — a 56% higher payment for a 43% reduction in total interest. Evaluate whether the monthly payment fits your budget before choosing the shortest term available.

What interest rate should I use for a car loan?

New car loans in the US averaged 6-7% in 2024-2025, used car loans 8-11%. Subprime borrowers (below 670 FICO) can face rates of 15-20%. If you have a specific loan offer, use that rate. If you are pre-shopping, estimate your rate based on your credit tier: prime (720+ FICO) gets the best rates, near-prime (670-719) gets moderate rates, and subprime (below 670) faces significantly higher rates and should prioritize improving credit before taking an expensive loan.

Should I make extra payments on my loan?

Yes — even one extra principal payment per year can shave years off a long-term loan and save tens of thousands in interest. Most auto loans and mortgages accept early principal payments without penalty, but check your loan agreement first. Student loans may have prepayment penalties on private loans; federal student loans have no prepayment penalty. When making extra payments, specify in writing that the extra goes toward principal — otherwise the lender may apply it to the next month's payment. Use our loan calculator to model how extra payments change your payoff date.

What is amortization and why does most of my payment go to interest early?

Amortization is the process of paying off a loan through scheduled installments where the split between interest and principal shifts over time. Each month, the lender charges interest on the remaining principal balance, then applies the rest of your payment to reduce that balance. Early in the loan, the balance is large, so the interest charge is large, leaving only a small amount for principal reduction. As the balance shrinks over time, the interest portion shrinks and the principal portion grows. This is why making extra principal payments early in the loan term has an outsized effect — you are reducing the balance that future interest is calculated on.

How does credit score affect my loan rate?

Credit score is one of the largest determinants of your loan rate. Each tier of credit score (poor/below 580, fair/580-669, good/670-719, very good/720-799, exceptional/800+) can carry a rate difference of 3-7 percentage points on the same loan type. On a $25,000 5-year auto loan, a rate difference of 6 percentage points (7% vs 13%) means $1,900 more in total interest paid. Checking your credit report for errors before applying for a major loan and disputing inaccuracies can sometimes raise your score enough to qualify for the best tier.

What is the difference between simple interest and precomputed interest?

Simple interest loans calculate interest on the remaining principal balance each month — this is standard for most mortgages, auto loans, and personal loans. Precomputed interest loans calculate the total interest for the entire loan term upfront and lock it in regardless of early payoff — these are common in some personal loans and some subprime auto financing. With a precomputed loan, paying off early or making extra payments does not save you as much interest as with a simple interest loan. Always ask whether the lender uses simple or precomputed interest before signing.

Should I refinance my existing loan?

Refinancing makes sense when you can get a rate at least 1-2 percentage points lower than your current rate, covering any refinancing fees within 12-18 months through monthly savings. It also makes sense if you are switching from an adjustable rate to a fixed rate for stability, or if you want to shorten your term. Refinancing is not worthwhile if you are paying off the loan soon (less than 2 years remaining), if your credit score has not improved, or if the fees outweigh the savings from a lower rate. Calculate the break-even point before proceeding.

Last updated Sep 13, 2026 — rates and figures change over time, so always confirm with the current source.

Estimates for general information only, not financial advice — see our disclaimer.

← Back to all tools