How loan payments work
Most personal loans, student loans and auto loans are paid back in equal monthly installments. Every payment covers the interest that built up on the balance that month, and the rest reduces the balance. Because the balance shrinks, the interest part gets smaller and the principal part larger over time, while the payment stays the same.
How the term changes the cost
The same $15,000 loan at 9.5% with different terms:
| Term | Monthly payment | Total interest |
|---|---|---|
| 24 months | $689 | $1,529 |
| 36 months | $480 | $2,298 |
| 48 months | $377 | $3,089 |
| 60 months | $315 | $3,902 |
| 72 months | $274 | $4,737 |
Interest rate vs. APR
Many lenders take an origination fee of 1 to 10 percent out of the loan. You pay interest on the full amount but receive less, so the real cost is higher than the rate suggests. The APR expresses that cost as one yearly rate. A $10,000 loan at 10% over 36 months with a $500 fee has an APR of about 13.6%.
How to use the loan calculator
- 1Enter the loan amount, the interest rate and the term in years or months.
- 2Optionally add upfront fees to see the APR, and an extra monthly payment to see how much sooner you are done.
- 3Check the total interest and the schedule. Copy the result, share a link, or download the schedule as a CSV file.
Frequently asked questions
How is the monthly payment calculated?
With the standard annuity formula, which spreads principal and interest into equal monthly payments: M = P × r ÷ (1 − (1 + r)^−n), where P is the loan amount, r the monthly rate and n the number of months. Each month the interest is charged on the remaining balance, and the rest of the payment reduces it.
What is the difference between the interest rate and the APR?
The interest rate is what you pay on the balance. The APR (annual percentage rate) also counts upfront fees such as an origination fee, which you pay even though you receive less money. Enter the fees and the calculator shows the APR, so you can compare offers fairly.
Is a longer term better?
A longer term lowers the monthly payment but raises the total interest, often by a lot. Pick the shortest term whose payment fits your budget comfortably.
Do extra payments help on a personal loan?
Usually yes: extra money goes to principal, so less interest builds up and the loan ends sooner. Check first that your lender does not charge a prepayment penalty.
Is this the offer I will get?
No. It is an estimate based on what you enter. Your actual rate depends on your credit, income and the lender. Use it to compare offers and plan your budget, not as financial advice.