What this loan calculator is for
Lenders rarely present offers in the same shape. One quotes a monthly instalment, another an annual rate, a third a total repayable. This calculator reduces any fixed-rate offer to the same three inputs so the comparison becomes arithmetic rather than guesswork.
It handles any purpose — a car, a kitchen, consolidating card balances — because the mathematics does not care what the money buys. What changes between loan types is the rate you are offered and the term you are allowed.
The formula behind the number
An amortising loan is repaid in equal instalments. Each one covers the interest that accrued since the last payment, and whatever is left reduces the balance. The instalment that brings the balance to exactly zero on the final payment is:
Here P is the amount borrowed, i is the monthly rate (the annual rate divided by 12) and n is the number of payments. Nothing else enters the calculation, which is why two lenders quoting the same three inputs must arrive at the same instalment.
Worked example: $25,000 at 7.5% over 5 years
The calculator opens on this scenario, so you can follow every step:
- Amount borrowed: $25,000
- Annual rate: 7.5%, so the monthly rate is 7.5 ÷ 12 = 0.6250%
- Term: 5 years, so n = 5 × 12 = 60 payments
Paying $500.95 every month for 60 months comes to $30,057. Subtract the $25,000 you actually borrowed and the cost of the credit is $5,056.92, or 20% of the sum borrowed.
Where each payment goes
The instalment never changes, but its composition does. The first payment carries $156.25 of interest and only $344.70 of principal. By payment 30 the split has moved to $87.99 interest against $412.96 principal.
| Payment | Instalment | Interest | Principal | Balance |
|---|---|---|---|---|
| 1 | $500.95 | $156.25 | $344.70 | $24,655 |
| 2 | $500.95 | $154.10 | $346.85 | $24,308 |
| 3 | $500.95 | $151.93 | $349.02 | $23,959 |
| 30 | $500.95 | $87.99 | $412.96 | $13,665 |
| 60 | $500.95 | $3.11 | $497.84 | $0.00 |
This is why paying off a loan early saves less than people expect near the end, and far more than they expect at the start.
What moves the answer most
Two levers change the total, and they do not pull with equal force.
Add one percentage point to the rate and the instalment goes from $500.95 to $512.91, which is $717.87 more over the full term. Cut 1 year off the term instead and the instalment rises to $604.47, but total interest falls from $5,056.92 to $4,014.68. A shorter term costs more each month but far less in total; a lower rate improves both at once, which is why it is worth shopping for.
What this calculator leaves out
Arrangement fees, insurance sold alongside the credit, and late-payment charges are excluded. A loan with a lower rate and a large origination fee can cost more than a higher-rate offer without one, so compare the APR rather than the headline rate.
Related calculators
- APR calculator — folds fees into the rate so two offers become comparable
- Loan comparison calculator — puts two offers side by side
- Debt-to-income calculator — shows whether a lender is likely to approve the amount