ClearCalcHow the loan calculator works
Most loans are amortizing: you pay the same amount every month, and each payment covers that month's interest first, with the rest reducing what you owe (the principal). Early in the loan most of your payment is interest; near the end almost all of it is principal. The chart above shows that shift year by year.
The monthly payment is calculated with the standard amortization formula:
M = P × r × (1 + r)n ÷ ((1 + r)n − 1)
- M – monthly payment
- P – loan amount (principal)
- r – monthly interest rate (annual rate ÷ 12 ÷ 100)
- n – number of monthly payments
Example: borrowing 20,000 at 8.5% for 5 years gives r = 0.00708 and n = 60, for a monthly payment of about 410.33 and total interest of roughly 4,620.
How to pay less interest
- Choose a shorter term. The monthly payment goes up, but total interest drops sharply because you borrow the money for less time.
- Pay a little extra each month. Every extra amount goes straight to principal. Try the "extra payment" box above to see how many months you save.
- Compare the APR, not just the rate. Fees and insurance added to a loan raise its real cost. The annual percentage rate (APR) includes them.
- Improve your credit first. A better credit profile usually qualifies for a lower rate, and even 1–2 percentage points saves a lot over several years.
Frequently asked questions
Does this work for car loans and mortgages?
Yes, any fixed-rate loan with equal monthly payments works. For a home loan that includes property tax and insurance, the mortgage calculator adds those costs for you.
What if my interest rate is 0%?
The calculator handles it: the payment is simply the loan amount divided by the number of months, and total interest is zero.
Why is my bank's payment slightly different?
Lenders may add fees, insurance or a different day-count method, and some round each payment. The result here is a close estimate; your loan agreement shows the exact figure.
Is my data saved or sent anywhere?
No. All calculations run in your browser. Nothing you type leaves your device.