Loan Payment Calculator

How to Use the Loan Payment Calculator

1. 1. Choose what to find. The payment for a loan amount, or the loan amount that a payment of your choosing can repay over the term.
2. 2. Enter the loan terms. The amount, the nominal annual rate, the term in years (add months if needed) and how often payments are made — monthly is the common case.
3. 3. Add an extra payment (optional). Whatever you enter is paid on top of every regular payment. The calculator re-runs the schedule and shows the interest and payments saved.
4. 4. Read the results. The payment, the total of all payments and the interest, with a note if the final payment differs because of rounding.
5. 5. Open the schedule. See each year summed up, or every payment with its interest, principal and remaining balance. Copy it to paste into a spreadsheet.

How a Loan Payment Is Calculated

For a loan of P at a rate i per period over n payments, the level payment is PMT = P × i ÷ (1 − (1 + i)⁻ⁿ). The rate per period is the annual rate divided by the payments per year, so a 6% loan paid monthly uses i = 0.005. This is the same payment as Excel's PMT function, with payments at the end of each period, and the calculator is checked against Excel's documented example (10,000 at 8% over 10 months is 1,037.03).

Each period the interest is the balance times i; the rest of the payment reduces the principal. Early payments are mostly interest and later ones mostly principal, which is why the balance falls slowly at first. Solving the formula the other way, a payment of PMT services a loan of PMT × (1 − (1 + i)⁻ⁿ) ÷ i.

Worked Example

A loan of 200,000 at 6% for 30 years, paid monthly, has i = 0.005 and n = 360. The payment is 1,199.10. The first month's interest is 200,000 × 0.005 = 1,000.00, so only 199.10 goes to principal and the balance becomes 199,800.90. Over the life of the loan the payments total 431,677.04, of which 231,677.04 is interest; the final payment is 1,200.14. In the first year, 11,933.19 of the 14,389.20 paid is interest.

Now add 200 to every payment. The loan is repaid in 252 payments — 21 years — instead of 360, the total interest falls to 151,876.18, and the extra payments save 79,800.86 in interest. That is the compounding effect of extra principal: each extra dollar stops accruing interest for the rest of the term.

What This Calculator Does Not Include

• Fees, taxes and insurance. A mortgage payment often includes property tax and insurance in escrow; a loan's disclosed APR may include fees. None is added here.
• Variable rates. The rate is fixed for the whole term.
• Lender-specific rules. Some loans charge prepayment penalties, apply extra payments to the next installment rather than to principal, or accrue interest daily on a day-count basis. Use the terms in your loan agreement for any real decision.
• Advice. This is an educational calculator, not financial advice.

Frequently Asked Questions

How do I calculate a loan payment?

Use PMT = P × i ÷ (1 − (1 + i)⁻ⁿ), where P is the amount borrowed, i the interest rate per period (annual rate ÷ payments per year) and n the number of payments. For 200,000 at 6% over 30 years paid monthly that gives 1,199.10.

What is an amortization schedule?

A table of every payment showing how much is interest, how much repays principal and the balance left. The interest part is highest at the start because it is charged on the largest balance. The schedule here can be shown by year or payment by payment.

How much does an extra payment save?

More than most people expect, because the extra money goes straight to principal and stops accruing interest. On 200,000 at 6% over 30 years, an extra 200 a month cuts the term from 360 to 252 payments and the interest by 79,800.86. Whether your lender applies extra payments to principal is a matter for its terms.

Why is my first payment mostly interest?

Interest is charged on the full balance, and at the start the balance is at its highest. On the example loan, 1,000.00 of the first 1,199.10 payment is interest. As the balance falls, a growing share of each fixed payment goes to principal.

How do I find how much I can borrow for a given payment?

Choose The loan amount a payment can repay, enter the payment, rate and term. The calculator solves the payment formula for P. For example, 1,500 a month for 30 years at 6.5% services a loan of about 237,316.

Do biweekly payments pay off a loan faster?

Only if they add up to more than the monthly payments would. Paying half the monthly payment every two weeks makes 26 half-payments, equal to 13 monthly payments a year, so one extra monthly payment goes to principal. Choose Every two weeks and compare the schedules, but check how your lender applies the payments.