Loan Payment Calculator what the instalment really costs
Enter the amount, the rate and the number of monthly payments. You get the instalment, the total interest, and what an extra payment each month would save.
One Formula, Every Loan
Personal loans, car finance, student debt and mortgages all use the same level-payment maths.
Principal and Interest Only
Insurance, arrangement fees and taxes billed alongside the loan are not part of this payment.
What is a loan payment calculator?
At a Glance
A loan payment calculator turns three numbers — the amount financed, the annual interest rate and the number of monthly payments — into the one figure that decides whether a loan is affordable: the fixed monthly instalment. It also shows the part lenders quote least often, the total interest you hand over across the whole term.
Nearly every consumer loan in Europe and North America is an annuity loan, also called a level-payment or fully amortizing loan. You pay the same amount every month, and each payment does two jobs: it covers the interest that accrued since the last payment, and whatever is left over reduces the balance.
Because the balance shrinks, the interest portion shrinks with it — so the split inside an identical payment shifts month by month from mostly interest to mostly principal. According to the Consumer Financial Protection Bureau, that shifting split is the single most misunderstood part of a loan agreement, and it is why paying off a loan early saves less than half-way through than people expect.
The payment itself comes from the closed form of the present value of an ordinary annuity:
M = P × i × (1 + i)ⁿ ÷ ((1 + i)ⁿ − 1)P is the amount financed, n is the number of monthly payments, and i is the monthly rate — the nominal annual rate divided by twelve. A 7.5 % loan therefore charges 0.625 % per month. When the rate is zero the formula is undefined and the payment is simply the amount divided by the number of months.
Two conventions matter here. This calculator uses monthly compounding of a nominal annual rate, which is the standard US and UK consumer-lending convention and the one behind almost every advertised instalment figure. It also reports principal and interest only: property tax, home insurance, payment protection and arrangement fees are real costs, but they are billed alongside the loan rather than being part of the annuity.
These are the values the calculator loads by default, so you can follow along on screen.
Turn the annual rate into a monthly rate
7.5 % ÷ 12 = 0.625 % per month, or 0.00625 as a decimal.
Grow one unit over the whole term
1.00625 raised to the 60th power = 1.4533. This is what one unit of money owed would become over five years at that rate.
Apply the annuity formula
25,000 × 0.00625 × 1.4533 ÷ 0.4533 = 500.95 per month.
Add up what that costs
500.95 × 60 = 30,057 repaid. Subtract the 25,000 borrowed and the loan cost 5,057 in interest — about a fifth of the sum borrowed.
Try an extra 50 a month
Put 50 into the extra-payment field and the balance reaches zero after 54 months instead of 60, with roughly 564 less interest. Six months of freedom for 50 a month.
The instalment is the number that decides affordability, but it is not the number that tells you whether the loan is good value.
Term does more damage than rate. Stretching the same 25,000 at 7.5 % from 60 months to 84 months drops the payment from about 501 to about 384 — a relief of 117 a month. It also raises total interest from roughly 5,057 to roughly 7,210. Longer terms are sold as cheaper and are in fact more expensive; only the monthly figure gets smaller.
The first payments are mostly interest. On the default loan, the first payment puts 156.25 towards interest and 344.70 towards the balance. By payment 60 that has flipped to about 3 and 498. This is why refinancing or overpaying early is worth far more than doing the same thing in the final year.
Extra payments are pure principal. Every unit you pay above the instalment removes a unit of balance permanently, and with it all the future interest that balance would have generated. That is why a modest, boring, constant overpayment beats an occasional lump sum of the same size.
If you are buying property rather than a car or a consolidation loan, the Mortgage Payment Calculator adds tax, insurance and the deposit. To see the split payment by payment, use the Amortization Schedule Calculator.
What this estimate does and does not include
This calculator is for informational purposes and assumes a fixed rate, equal monthly payments and no fees. Real agreements vary in ways that move the number:
- Fees and APR. An arrangement or origination fee raises the APR above the nominal rate even when the instalment is unchanged. Compare offers on APR, not on the monthly figure.
- Variable rates. If the rate can move, the payment or the term moves with it, and everything below the first repricing date is a projection.
- Day-count conventions. Some lenders accrue interest daily rather than monthly, which shifts the payment by a few units either way over a long term.
- Prepayment terms. Many agreements cap or charge for early repayment, so the saving shown for extra payments assumes your contract allows them without penalty.
Figures are rounded to two decimals for display, and totals are summed from unrounded monthly values. Always verify the payment against the lender's own binding offer, and consult a qualified financial advisor before committing to long-term borrowing.