Loan Calculator

The calculator applies the same monthly rate every month. It does not count interest by the day.

• Monthly rate = annual rate ÷ 12
• Interest for each payment = previous balance × monthly rate, rounded to the nearest whole unit
• Equal payments = balance × r × (1 + r)^m ÷ ((1 + r)^m − 1), rounded to the nearest whole unit
  • r is the monthly rate and m is the number of payments left.
  • At 0% the payment is balance ÷ m.
  • Principal repaid that month = payment − that month’s interest
• Equal principal: principal each month = balance after any interest-only period ÷ payments left, rounded to the nearest whole unit
• Interest only: you pay interest every month and the whole principal with the last payment.
• Interest-only period: during it you pay interest only. When it ends, the repayment type you chose applies to the payments that are left.
• Last payment: it pays off whatever balance is left, so the schedule always ends at a balance of 0.
• Prepayment fee = prepayment amount × fee rate, rounded to the nearest whole unit
• After a prepayment, Lower the monthly payment works out a new payment over the payments that are left. Shorten the term keeps the payment the same and ends the loan sooner.

Prepayment fees (also called prepayment penalties or early repayment charges) depend on your country, the type of loan and your contract. Many loans have none, and some charge a fee only in the first few years. The calculator does not check any of that. It simply multiplies the amount you prepay by the fee rate you enter. Check your loan agreement for the fee that applies to you.

Borrowing 300,000 at 6% for 30 years (360 payments):

• With equal payments you pay 647,299 in total.
• The first payment of 1,799 is 1,500 of interest and 299 of principal, which leaves a balance of 299,701. As the balance falls, each payment carries less interest and more principal.
• Equal principal costs 76,438 less in interest than equal payments, but the payments are higher in the early years.

With a 12-month interest-only period (equal payments)

• Payments 1 to 12 are interest only: 1,500 each.
• From payment 13, the loan is spread over the remaining 348 months at 1,821 a month.
• Total interest is 351,711, which is 4,412 more than without the interest-only period.

Prepaying 30,000 after payment 60 (equal payments, 2% fee)

• The prepayment fee is 600 either way.
• Shortening the term saves far more interest, because the balance falls faster. Lowering the payment leaves you more room in your monthly budget.

A personal loan of 20,000 at 9% for 3 years (36 payments)

• With a short 3-year term, equal principal saves only 120 in interest compared with equal payments. On the 30-year mortgage above the gap was 76,438. The longer the loan, the more the repayment type matters.
• Interest only costs the most, because the principal never goes down.

On the same personal loan, prepaying 5,000 after payment 12 (2% fee):

• The prepayment fee is 100. When the interest saved is more than the fee, prepaying saves money.

An interest-only loan of 100,000 at 5% for 2 years (24 payments)

• You pay 417 in interest every month and 100,417 with the 24th payment.
• Total interest is 10,008. That is 8 more than 100,000 × 5% × 2 years = 10,000, because each month’s interest of 416.67 is rounded up to 417.

What 1 percentage point does (300,000 over 30 years, equal payments)

• Going from 6% to 7% adds 197 to every monthly payment and 71,143 to the total interest.

• 0% interest: 300,000 over 360 months is 833 a month, with total interest of 0. It works without an error.
• No interest-only period for interest-only loans. The loan is already interest only, so the field is turned off.
• Long loans: you can enter up to 600 months (50 years), and the schedule shows every payment to the end.
• The last payment is a little different. Each payment is rounded to a whole unit, and the small differences build up until the last payment clears the balance. In the 30-year equal-payments example, the exact payment is 1,798.65. Rounded up to 1,799, every payment repays a little extra, so the last payment is only 1,458. The principal repaid always adds up to exactly the loan amount.
• Some lenders scale the prepayment fee down over time. This calculator multiplies the prepayment by the fee rate as entered. Check how your agreement works out the fee.
• Limits: the annual rate can be 0% to 30% and the prepayment fee rate 0% to 5%.

Why your lender’s schedule may differ

Many fixed-rate mortgages charge one twelfth of the annual rate each month, the same as this calculator. Other loans, including many car and personal loans, charge interest by the day. Then a month’s interest is balance × annual rate × days in the month ÷ 365. Here is one month’s interest on 300,000 at 6%, worked out by hand (the calculator does not do the daily method):

The monthly amounts go up and down, but over a whole year they come out almost the same. So a daily-interest schedule can differ from this one by a few units a month, and the first payment can differ more, depending on how many days there are between the loan date and the first payment date.

What is the difference between “Lower the monthly payment” and “Shorten the term”?

Lowering the payment keeps the same end date and reduces what you pay each month. Shortening the term keeps the payment the same and ends the loan sooner. In both examples above, shortening the term saved more interest.

Why is the result a little different from my lender’s figure?

The calculator uses one twelfth of the annual rate as the monthly rate, does not count interest by the day, and rounds every month to a whole unit. Real loans may charge interest by the day or round differently, so the amounts can differ slightly.

What is an interest-only period?

It is a stretch at the start of a loan when you pay interest but no principal. When it ends, the principal has to be repaid over fewer months, so the payments are higher than they would have been without it. This is different from a “grace period” for late payments, which some lenders also offer.

Can it handle a variable or adjustable rate?

No. The calculator assumes the same rate for the whole term. To see the effect of a rate change, run it again with the new rate, as in the table above.

Can I rely on these numbers to choose a loan?

Treat them as an estimate. The result comes from the numbers you enter and the assumptions above. Your real payments and interest follow your loan agreement and your lender’s calculation. Before you decide, check the figures your lender gives you, such as the loan estimate or the repayment schedule in your offer.

Should I choose equal payments or equal principal?

There is no single right answer. It depends on what matters more to you. On the same terms, equal principal costs less interest in total, but the payments are higher in the early years. Equal payments stay the same every month, which makes budgeting easier. Compare the first payment and the total interest of both here, and pick the one whose payments you can comfortably afford.

Does prepaying always save money?

It saves on interest when the interest saved is larger than the prepayment fee. In the personal loan example, a fee of 100 brought the interest down by 480 (lower payment) or 799 (shorter term). Also think about what else that money could do for you, such as an emergency fund, before you use it to pay down a loan.

How do I enter a loan that is repaid all at once at the end?

Choose Interest only as the repayment type. You see the monthly interest and the amount due with the last payment. You cannot add an interest-only period to this type.

This page explains a general calculation method. It is not personal financial advice. Before you take out a loan, check the repayment plan and the loan agreement your lender gives you.