How the loan calculator works
This loan calculator turns a loan amount, interest rate, and term into your monthly payment, the total interest you will pay, and a full amortization schedule. It works for mortgages, personal loans, student loans, and any fixed-rate amortized debt. Switch to max-borrowing mode and it does the reverse: finding the largest loan a monthly payment you can afford will support.
How to use it
- Enter the loan amount (the principal you are borrowing).
- Set the annual interest rate and the loan term in years.
- Choose the payment frequency if it is not monthly.
The result updates as you type. Add prepayments to see how extra payments shorten the term and cut interest.
How the monthly payment is calculated
Each payment covers the interest due that period plus a slice of principal. Early payments are mostly interest and later ones mostly principal — this is how amortization works:
On a 30-year mortgage you typically pay more in interest than the amount you borrowed. Shortening the term or making prepayments are the two most effective ways to reduce total interest cost.
Choosing between a shorter and longer term
A shorter term means a higher monthly payment but far less total interest. A longer term lowers the payment but costs significantly more overall:
If you can afford the higher payment, a 15 or 20-year term saves hundreds of thousands in interest. If cash flow is tight, take the longer term but add prepayments when you can. The amortization table shows the impact of each choice.
Reading the amortization schedule
The chart tracks three lines over the life of the loan: the remaining balance falling toward zero, the cumulative principal repaid, and the cumulative interest paid. The table breaks it down year by year, so you can see the split shift from interest-heavy to principal-heavy as the balance shrinks.
In early years, most of each payment goes to interest. On a 30-year loan, it typically takes 15–18 years before the principal portion exceeds the interest portion of each payment.
Prepayments: paying it off faster
A one-time prepayment goes straight to principal, so less balance accrues interest for the rest of the term. The calculator keeps your regular payment the same and shortens the loan, showing the months saved and the interest avoided.
Even small extra payments compound over time. An extra $200/month on a $300,000 mortgage at 6.5% can save over $80,000 in interest and cut 5+ years off the term.
What the interest rate actually means
The rate in this calculator is the nominal annual rate. Note:
- APR vs interest rate: APR includes certain lender fees, so it is usually slightly higher. Use the figure your lender quotes for the payment you want to model.
- Fixed vs variable: this calculator assumes a fixed rate for the full term. For a variable-rate loan, re-run with the new rate after each adjustment to see the impact.
- Rate comparison: even a 0.25% difference matters on a large loan. On $400,000 over 30 years, 6.5% vs 6.25% costs about $23,000 more in total interest.
Max-borrowing mode: how much can you afford?
Switch to max-borrowing mode when you know the monthly payment you are comfortable with and want the loan amount it supports. Enter the payment, rate, and term, and the calculator inverts the formula to find the largest principal whose payment fits your budget.
Remember that affordability is more than the loan payment. Factor in property taxes, insurance, maintenance (for a mortgage), or registration and fuel (for a car). A common guideline is to keep total housing costs below 28–30% of gross income.
For a car loan specifically, with trade-in, sales tax, and dealer fees, use the auto loan calculator. For a one-off simple-interest charge rather than an amortized loan, see the simple interest calculator.
Frequently asked questions
Should I choose a shorter or longer loan term?
A shorter term means a higher monthly payment but far less total interest. On a $300,000 loan at 6.5%, a 15-year term costs about $170,000 in interest versus $382,000 for 30 years. Choose the shortest term whose payment you can comfortably afford, leaving room for emergencies.
How much can prepayments actually save?
Significantly. Even small extra payments compound savings over the remaining term. An extra $200/month on a $300,000 mortgage at 6.5% can save over $80,000 in interest and cut 5+ years off a 30-year loan. Add prepayments in the calculator to see the exact impact.
What is the difference between interest rate and APR?
The interest rate is the cost of borrowing the principal. APR also includes certain lender fees (origination, points), so it is usually higher and is better for comparing loan offers apples-to-apples. Enter whichever figure your lender quotes.
Does this work for a variable-rate loan?
This calculator assumes a fixed rate for the full term. For a variable-rate loan, re-run it with the new rate after each adjustment period to see how your payment and remaining interest change. It won't model automatic rate adjustments.
How is max-borrowing mode useful?
It tells you the largest loan your budget supports. Enter the monthly payment you can afford, the rate, and the term, and it solves for the maximum principal. Remember to leave room for taxes, insurance, and maintenance on top of the loan payment.
Why is so much of my early payment going to interest?
That is how amortization works. Interest is calculated on the remaining balance, which is highest at the start. As you pay down principal, the interest portion shrinks and the principal portion grows. On a 30-year loan, it typically takes 15–18 years before principal exceeds interest in each payment.