Loan Calculator

How to Use This Loan Calculator

1. Enter the total loan amount you wish to borrow.

2. Input the annual interest rate as a percentage.

3. Set the loan term in years or months using the dropdown selector.

4. Click "Calculate Loan" to see your monthly payment, total interest, and total cost.

5. Review the amortization schedule to see how each payment is split between principal and interest over the life of your loan.

What is a Loan?

A loan is a financial agreement where a lender provides money to a borrower, who agrees to repay the amount with interest over a specified period. Loans can be secured (backed by collateral like a house or car) or unsecured (based solely on the borrower's creditworthiness). The interest rate, loan term, and repayment structure determine your monthly payment and the total cost of borrowing.

Most consumer loans use amortization, which means each monthly payment includes both principal and interest. In the early years of the loan, a larger portion of your payment goes toward interest because the outstanding balance is higher. As you pay down the principal over time, more of each payment goes toward reducing your balance and less goes toward interest.

Types of Loans

This calculator works for various loan types including mortgages, auto loans, personal loans, student loans, and business loans. Each loan type has typical terms and rates. Mortgages commonly have 15 to 30 year terms with rates between 5% and 8%. Auto loans typically range from 2 to 7 years with rates from 4% to 15%. Personal loans usually have 1 to 7 year terms with rates from 6% to 36% depending on credit quality.

Understanding the differences between loan types helps you make better borrowing decisions. Secured loans like mortgages and auto loans typically offer lower interest rates because the lender can repossess the collateral if you default. Unsecured loans like personal loans and credit cards have higher rates because they carry more risk for the lender.

Factors That Affect Your Loan

Several factors influence your loan terms and total cost. Your credit score is one of the most important factors. Borrowers with excellent credit (740 or above) typically receive the lowest rates, while those with poor credit may pay significantly more or be denied altogether. Improving your credit score before applying for a major loan can save you thousands of dollars.

The loan term also significantly affects your costs. Shorter terms mean higher monthly payments but less total interest paid. Longer terms reduce your monthly payment but increase the total interest over the life of the loan. For example, a $25,000 loan at 6.5% costs $11,150 in interest over 10 years, but only $4,350 over 5 years, even though the monthly payment is higher with the shorter term.

Tips for Getting the Best Loan

Shop around and compare offers from multiple lenders. Rates and terms can vary significantly between banks, credit unions, and online lenders. Get pre-qualified with several lenders to see what rates you qualify for without affecting your credit score. Once you are ready to apply, submit all applications within a 14-day window so they count as a single inquiry on your credit report.

Consider the total cost of the loan, not just the monthly payment. A lower payment with a longer term might seem attractive, but you could pay thousands more in interest. Use this calculator to compare different scenarios and find the right balance between affordable monthly payments and minimizing total interest paid.

Monthly Payment Formula

The monthly payment formula is: M = P[r(1+r)^n]/[(1+r)^n-1]

Where: M = Monthly payment, P = Principal (loan amount), r = Monthly interest rate (annual rate / 12), n = Total number of payments (loan term in months).