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Loan Calculator

A loan payment is P × r ÷ (1 - (1 + r)^-n), where P is the amount borrowed, r the monthly rate (APR ÷ 12) and n the number of months. Borrowing $28,000 at 7.9% APR for 60 months costs $566.40 a month and $5,984 in total interest.

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%
Term
Monthly payment$566.40
Total interest$5,984
Total paid$33,984
Principal $28,000Interest $5,984

Standard amortizing loan with a fixed APR and equal monthly payments.

How to use the Loan Calculator

  1. Enter the amount you want to borrow.
  2. Enter the APR offered by the lender.
  3. Choose a term of 36, 48, 60 or 72 months.
  4. Read the monthly payment, total interest and total paid, and compare terms by switching between them.

Formula

Payment = P × r ÷ (1 - (1 + r)^-n) where r = APR ÷ 12 and n = months

This is the standard amortizing loan formula used for car, personal and most business term loans. Total interest is payment × n - P. Using the APR rather than the base rate includes most lender fees in the comparison.

Shorter versus longer terms

A $20,000 car loan at 5% costs about $1,579 in interest over 3 years and about $3,191 over 6 years. Longer terms lower the monthly payment but raise the total cost, and with cars they increase the chance of owing more than the vehicle is worth.

Common loan types

  • Auto loans: secured by the car, usually 36 to 72 months.
  • Personal loans: usually unsecured, 24 to 84 months, rates depend heavily on credit.
  • Student loans: often longer terms and income-based options.
  • Business term loans: fixed payments for equipment or expansion.

Loan Calculator questions

How is a monthly loan payment calculated?

Lenders use the amortization formula payment = P × r ÷ (1 - (1 + r)^-n), where P is the loan amount, r is the monthly rate (APR ÷ 12) and n is the number of months. For $28,000 at 7.9% over 60 months, the payment is $566.40.

Should I choose a shorter or longer loan term?

Choose the shortest term whose payment fits comfortably in your budget. Shorter terms cost far less interest: a $20,000 loan at 5% costs about $1,579 in interest over 3 years versus about $3,191 over 6 years. Longer terms lower the payment but raise the total cost.

What is the difference between APR and interest rate?

The interest rate is the cost of borrowing the principal. The APR (annual percentage rate) adds most lender fees, such as origination fees, so it reflects the true yearly cost. Lenders must disclose APR, which makes it the best number for comparing offers.

What credit score do I need for a good loan rate?

Scores of about 740 and above usually get the best rates, 670 to 739 get good rates, and 580 to 669 pay noticeably more. Below about 580, lenders may require collateral or a co-signer. Checking your report for errors before applying can lift your score quickly.

How much can I afford to borrow for a car?

A popular guideline is 20/4/10: put at least 20% down, finance for no more than 4 years, and keep total car costs, including insurance and fuel, under 10% of gross income. On a $50,000 salary, that is about $417 a month for all car expenses.

Can I pay off a loan early?

Most auto and personal loans allow early payoff without penalty, but check your agreement for prepayment fees. Paying extra toward principal shortens the loan and cuts total interest. Ask the lender to apply extra payments to principal rather than to future payments.

What is the difference between secured and unsecured loans?

A secured loan is backed by collateral such as a car or savings, so rates are lower but the lender can take the asset if you default. An unsecured loan has no collateral, so it relies on your credit and usually carries a higher rate.

What fees should I watch for when taking out a loan?

Look for origination fees (often 1% to 8% of the loan), application fees, late payment fees and prepayment penalties. Origination fees are often deducted from the amount you receive. Ask for a full fee disclosure and compare offers by APR.

How does debt-to-income ratio affect loan approval?

Lenders compare your monthly debt payments with gross monthly income and generally prefer a total below about 36%. With $5,000 monthly income, that means keeping all debt payments under about $1,800. A lower ratio improves approval odds and rates.