Loan Payment Calculator
Use your own numbers after reviewing the formula and worked example.
Quick answer
Fixed installment loans use principal, a periodic interest rate and a number of payments to calculate a level payment.
Formula or method
Keep units, percentages and time periods consistent. The formula is useful as a transparent check on the calculator result and helps explain why changing one input changes the answer.
Step-by-step
- Use the amount financed.
- Convert the annual rate to a monthly decimal rate.
- Convert the term to total monthly payments.
- Apply the formula and compare total payments with principal.
Worked example
A $25,000 loan at 8% for five years has a payment of about $506.91 and roughly $5,414.59 of total scheduled interest.
How to interpret the result
Longer terms usually lower the payment but can increase total interest.
When the answer is used for a purchase, loan, payroll decision, construction order, school grade, health estimate or other real-world choice, verify the assumptions that matter in that context. Accurate arithmetic still depends on accurate inputs.
Common mistakes
- Using purchase price instead of amount financed.
- Ignoring fees.
- Choosing a term only because the payment is lower.
Frequently asked questions
Is APR always the same as the nominal rate?
No; APR can include certain finance charges.
Can variable-rate loans use this exact formula?
This page assumes a fixed rate and level payment.
Do extra payments matter?
Yes, when applied to principal they can shorten payoff time.