How it works
Most installment loans are paid off with equal monthly payments. Early payments are mostly interest; later ones are mostly principal, because interest is charged on the balance that's left. The payment is set so the balance hits exactly zero on the last payment.
M = P × r ÷ (1 − (1 + r)−n)
Here P is the amount borrowed, r is the monthly rate (APR ÷ 12 ÷ 100) and n is the number of monthly payments. Total interest is M × n − P.
Results don't include fees, insurance or taxes your lender may add. Your actual payment may differ slightly because of rounding.
Worked example
You borrow $10,000 at 5% APR for 36 months.
Monthly rate r = 0.05 ÷ 12 = 0.0041667. Plugging in: M = 10,000 × 0.0041667 ÷ (1 − 1.0041667−36) = $299.71 a month.
Over 36 payments you pay $10,789.52, so the loan costs $789.52 in interest.
Frequently asked questions
What is APR?
APR (annual percentage rate) is the yearly cost of borrowing. For a simple loan with no fees it equals the interest rate. If the lender charges fees, the APR is higher than the advertised rate.
Does a longer loan term save money?
It lowers the monthly payment but raises total interest. At 5%, $10,000 over 36 months costs $789.52 in interest; over 72 months it costs about $1,595.
What happens if I pay extra each month?
Extra payments go straight to principal, so you finish early and pay less interest. Check that your loan has no prepayment penalty first.
Can I use this for a 0% loan?
Yes. Enter 0 as the rate and the payment is simply the amount divided by the number of months.