Loan Payment Calculator
EMI = P × [r(1+r)^n] / [(1+r)^n − 1]
How Loan Payments Are Calculated
Most installment loans use an amortization formula that produces equal monthly payments over the loan term. Each payment covers both interest on the remaining balance and a portion of the principal. Early payments are mostly interest; later payments are mostly principal. The standard formula is: M = P × [r(1+r)^n] / [(1+r)^n − 1], where M is the monthly payment, P is the loan amount, r is the monthly interest rate, and n is the total number of payments.
Consider a $20,000 auto loan at 5% APR for 5 years (60 months). The monthly rate is 0.05 ÷ 12 ≈ 0.004167. Plugging into the formula gives a monthly payment of approximately $377.42. Over 60 payments, you pay a total of $22,645.20 — meaning $2,645.20 in interest on top of the $20,000 borrowed.
The interest rate (APR) and loan term have a powerful combined effect on your payment and total cost. Stretching a loan to a longer term lowers the monthly payment but increases total interest dramatically. A $15,000 loan at 6% costs $456.33/month over 3 years ($16,428 total) but only $290.22/month over 5 years ($17,413 total) — saving $166/month while paying $985 more overall.
When shopping for loans, compare the APR rather than the nominal rate, because APR includes certain fees and reflects the true cost of borrowing. Also watch for prepayment penalties that charge you for paying off the loan early — paying extra principal each month reduces total interest without changing the required minimum payment on most loans.
This calculator helps you budget before borrowing, compare loan offers, and understand the true cost of financing a car, consolidating debt, or funding education. Enter the loan amount, annual interest rate, and term in years to see your fixed monthly payment and total repayment amount.
Examples
| Example | Result |
|---|---|
| $20,000 at 5% for 5 years | Monthly payment $377.42, total $22,645.20 |
| $15,000 at 6% for 3 years | Monthly payment $456.33, total $16,427.88 |
| $10,000 at 4.5% for 4 years | Monthly payment $228.66, total $10,975.68 |
| $25,000 at 7% for 6 years | Monthly payment $426.23, total $30,688.56 |
| $8,000 at 3.9% for 2 years | Monthly payment $347.04, total $8,328.96 |
| $30,000 at 5.5% for 7 years | Monthly payment $431.10, total $36,212.40 |
| $5,000 at 8% for 1 year | Monthly payment $434.94, total $5,219.28 |
Frequently asked questions
M = P × [r(1+r)^n] / [(1+r)^n − 1], where P is principal, r is monthly rate (APR ÷ 12), and n is total months.
No. Longer terms lower monthly payments but increase total interest paid because you borrow money for more time.
Annual Percentage Rate is the yearly cost of borrowing including interest and certain fees. It reflects the true cost better than the nominal rate alone.