Formula
For a positive interest rate, the fixed monthly payment is:
M = P × r(1 + r)n / ((1 + r)n − 1)
P is the loan amount, r is the annual rate divided by 12, and n is the number of monthly payments. At a zero rate, the payment is the loan amount divided by n. This is the standard fixed-rate amortization formula used for ordinary monthly consumer loans.
Assumptions
- The interest rate stays fixed for the full term.
- Payments are made monthly, at the end of each month.
- Interest is calculated on the remaining balance and rounded to the nearest cent.
- The final payment changes by any remaining cents so the balance ends at zero.
- Fees, insurance, taxes, and variable rates are not included.
Worked example
A $25,000.00 loan at 6.5% for 5 years has a monthly payment of $489.15. Total interest is $4,349.20, and the total amount paid is $29,349.20.
Input definitions
- Loan amount
- The principal borrowed, from one cent through 100 billion in the selected display currency.
- Annual interest rate
- The nominal yearly rate from 0 to 100 percent, with up to four decimal places.
- Term
- Years plus up to 11 additional months. The combined term must be from 1 to 600 months.
Limitations
This is an estimate, not a loan offer or financial advice. Lenders may use different rounding, day-count conventions, fees, or payment dates. Variable-rate, interest-only, and balloon loans need a different model. Compare the interest rate with the lender’s APR before borrowing.
Questions
Does this loan calculator include lender fees?
No. It calculates principal and interest for a fixed-rate loan. Origination fees, insurance, taxes, and other charges are not included, so a lender’s APR can be higher than the interest rate entered here.
How is the monthly payment calculated?
The payment uses the standard fixed-rate amortization formula. The annual rate is divided by 12, and that monthly rate is applied to the remaining balance. Each scheduled payment is rounded to the nearest cent, and the final payment is adjusted to bring the balance to zero.
What happens when the interest rate is zero?
The loan amount is divided evenly by the number of months. Any leftover cent is added to the final payment, and the total interest is zero.
Can the currency selector convert my loan?
No. The currency control changes only the display symbol and formatting. It does not apply an exchange rate or change the numeric result.