Loan Calculator

Monthly payment anatomy

For any fixed-rate loan — mortgage, car, personal — the monthly payment, total interest, and balance trajectory are fully determined by three numbers: principal, rate, and term. This tool computes all of them and renders the month-by-month amortization schedule so you can see exactly where each payment goes. The extra-payment slider lets you check the impact of paying a little above the required amount, which on a mortgage often shortens the loan by years.

The amortization formula

For a loan of principal L at monthly rate r over n months, the fixed monthly payment P that exactly pays it off is:

P = L × r(1+r)^n / ((1+r)^n − 1)

Each month the interest accrued is balance × r; the rest of the payment chips away at principal. Early in the loan, most of the payment is interest; late in the loan, most is principal. That's why paying extra early saves disproportionately more interest than paying extra late.

What you can model

• Mortgage shopping. Compare 15-year vs 30-year terms or two different rates side by side.
• Car loans. See the real cost of a "0% APR" vs a rebate-and-finance offer.
• Personal loans / debt consolidation. Decide whether a lower rate over a longer term saves money or just spreads pain.
• Extra-payment planning. Test "$200/month extra" or "lump sum once a year" scenarios.
• Refinance check. Compute remaining interest at the current rate, then re-enter the smaller balance at the new rate and term.

Fine print the payment doesn't show

• APR ≠ note rate. The annual percentage rate (APR) in disclosures includes fees and points; the "note rate" here is the bare interest rate. APR is the better number for comparing loans, but the note rate is what computes your payment.
• Compounding convention. US mortgages compound monthly: monthly rate = annual / 12. Canadian mortgages compound semi-annually by law (so monthly rate is slightly different). This calculator uses simple monthly compounding — adjust if you're modelling a Canadian or unusual product.
• Escrow / impounds aren't shown. Your mortgage servicer usually adds property tax and insurance to your monthly payment and pays them on your behalf. That's not included here — see mortgage-affordability-calculator for PITI.
• Variable-rate loans. ARM, tracker, or variable-rate mortgages re-calculate after each rate change. This tool assumes a single fixed rate for the full term — useful as a "if rate stayed flat" baseline, not a forecast.
• Prepayment penalties. Some loans (esp. US auto and short-term mortgages from before 2010) charge a fee for paying extra. Read your terms before relying on the "extra payment saves Y interest" figure.
• Rounding. Banks round each monthly payment to cents and absorb the final cent or two in the last payment. Our schedule does the same — the last row's balance is forced to zero.

The interest tilt and how to fight it

• The "interest in the early years" trap. On a 30-year fixed mortgage at 6%, the first month's payment is about 75% interest and 25% principal. The principal share only crosses 50% around year 18. People who don't internalise this are shocked to see their balance barely move in the first few years. The math is the same on every loan — the rate × balance interest charge dominates until the balance has dropped substantially.
• Extra payments are the only honest optimisation. Refinancing to "save interest" usually trades short-term cash flow for long-term interest the bank pockets via closing costs and a reset clock. Paying an extra $100/month on the principal of an existing loan is risk-free, fee-free, and saves real interest. On a $300K loan at 6%, an extra $200/month pays off the loan ~7 years early and saves ~$80K total. Run your own numbers here.
• The 1% rule for refinancing isn't universal. The folk advice "refinance if rates drop 1%" originated in 1990s low-fee environments. With modern closing costs ($3-8K), the break-even depends on how long you stay in the home. Quick test: divide closing costs by monthly savings = months to break even. If you'll move before that, the refi loses money.
• Bi-weekly payments are a marketing repackaging. "Pay 26 half-payments per year" is mathematically equivalent to making 13 monthly payments per year — i.e., one extra month per year. Bi-weekly programs often charge a setup fee for what you could do yourself by adding 1/12th of a payment to each month. Same effect, no fee.
• The opportunity-cost argument has limits. "Don't pay off a 4% loan if you can earn 8% in the market" assumes the 8% return is risk-free (it isn't), tax-equivalent (it usually isn't), and that you're disciplined enough to actually invest the difference (most people aren't). For loans at or below long-term inflation, the carry-vs-payoff math favours carrying. For loans above ~6-7%, payoff usually wins on a risk-adjusted basis.

Pairs with

• mortgage-affordability-calculator — work backwards from your income to a max price, then use this tool to see the schedule.
• percentage-calculator — quick check on rate changes (e.g. what's 6.5% × 1.1?).
• currency-converter — if you're modelling a loan in a foreign currency.

$250,000 at 6.5% for 30 years

Borrow $250,000 at 6.5% over 30 years. The formula gives a fixed payment of about $1,580/month, and over the full term you repay roughly $569,000 — meaning $319,000 of it is pure interest, more than the loan itself. Now add $200/month extra: the schedule collapses by about seven years and cuts tens of thousands off that interest, because every extra dollar early kills interest on the entire remaining balance for the rest of the loan.

Quick answers

Why does paying extra early save so much more than paying extra later? Interest each month is charged on the outstanding balance. A dollar knocked off in year 1 avoids interest for ~29 years; the same dollar in year 25 avoids only a few years of it. Front-loaded overpayments do the heavy lifting.

Does this include property tax and insurance? No — it computes principal and interest only. For a mortgage, add tax, insurance and any HOA on top; the affordability calculator handles that side.

15-year or 30-year? A 15-year term carries a higher monthly payment but far less total interest. Model both here and compare the total-interest figures — the gap is usually large enough to be the real decision.

Is the rate I enter the APR? Enter the nominal annual interest rate. APR bundles in fees, so it runs slightly higher than the rate that actually drives your payment.

Principal vs interest over time

A fixed-rate loan uses the standard amortization formula: M = P · r(1+r)ⁿ ÷ ((1+r)ⁿ − 1), where P is the amount borrowed, r is the monthly rate (annual rate ÷ 12), and n is the number of monthly payments. The payment M stays constant, but its split does not: early on, most of each payment is interest charged on a still-large balance, and only a sliver reduces principal. As the balance falls, the interest slice shrinks and the principal slice grows — which is why an amortization schedule curves rather than paying down in a straight line, and why the last few years retire principal fast.

The monthly-payment illusion

Comparing two loans on the monthly payment alone. A longer term almost always shows a lower monthly figure, so it feels cheaper — while quietly costing far more in total interest. Always read the total-interest number next to the payment: a 30-year loan can cost tens of thousands more than a 15-year one at the same rate even though its monthly payment looks friendlier.

Related

Pair this with the mortgage affordability calculator to work backwards from income to a price, the refi comparison once you already hold a loan, and the debt payoff planner for multiple balances at once. For the timing logic behind refinancing an existing loan, see our guide on the refinance breakeven math.