Loan Calculator
Calculate monthly payments, total interest, and visualize your loan breakdown. Supports 4 repayment types.
How Loan Payments Work
Most loans use the fixed payment (amortized) method, where every monthly payment is the same dollar amount for the life of the loan. The formula behind this is M = P[r(1+r)^n] / [(1+r)^n - 1], where P is the principal (loan amount), r is the monthly interest rate (annual rate divided by 12), and n is the total number of monthly payments. This formula balances principal and interest so that the loan is fully paid off by the last payment.
To see the formula in action, consider a $300,000 mortgage at 6.5% APR over 30 years. The monthly rate is 0.065/12 = 0.005417, and the total number of payments is 360. Plugging these into the formula gives a monthly payment of approximately $1,896. Over the full 30 years you will pay about $682,633 in total — meaning roughly $382,633 goes to interest alone, more than the original loan amount. Even a small rate change matters: at 7% the same loan costs an extra $36,000 in interest over its lifetime.
This calculator also supports three other repayment methods. Fixed Principal keeps the principal portion constant each month while interest decreases, so your total payment starts high and gradually drops — this saves on total interest but requires higher payments early on. Interest Only pays just interest each month with the full principal due at maturity, common for short-term investment financing. Balloon loans calculate small payments based on a longer amortization period but require a lump-sum payoff at a shorter balloon date.
Understanding amortization is key to smart borrowing. In the early years of a fixed-payment loan, the vast majority of each payment goes toward interest rather than principal. For instance, on the $300,000 mortgage example above, the first payment puts about $1,625 toward interest and only $271 toward principal. By the midpoint of the loan, the split is roughly even, and in the final years almost the entire payment reduces the principal balance. This is why making extra principal payments early in the loan term is so effective — each extra dollar directly reduces the balance on which future interest is calculated.
When comparing loans, focus on total interest paid rather than just the monthly payment. A longer term lowers your monthly cost but dramatically increases total interest. For home loans specifically, our mortgage calculator includes property taxes, insurance, and PMI. To understand how your loan interest compounds, see our compound interest calculator. Use the amortization schedule this calculator provides to see exactly how each payment is allocated and to evaluate strategies like biweekly payments or additional lump-sum contributions.