Loan Calculator
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Amount, annual interest rate, term in years.
About the
The Loan Calculator works out the fixed monthly payment on an amortising loan, the total interest paid over the whole term, and how each payment splits between interest and principal. That split is the part people underestimate: on a long mortgage the early payments are mostly interest, so the balance barely moves for the first few years, and adding a small extra amount to each payment cuts the term by far more than the extra amount suggests. Entering a different term or rate shows immediately how much a shorter term saves in interest against how much more it costs per month.
Where people use the
- Comparing a 20-year and a 30-year term on the same amount.
- Checking whether a refinance offer at a lower rate actually saves money after fees.
- Working out how much of the first year's payments goes to interest rather than principal.
- Estimating a monthly commitment before applying.
How to use the
- 1
Enter the amount borrowed
The principal only, not the purchase price. If there is a deposit, subtract it first.
- 2
Enter the annual interest rate
Use the nominal annual rate the lender quotes, before any arrangement fee. A rate quoted as monthly should be multiplied by twelve.
- 3
Set the term in years
The term drives the payment size more than anything else. Doubling the term roughly halves the payment but increases total interest substantially.
- 4
Read the payment and the total
The monthly figure is what the lender will collect; the total interest is what the loan actually costs on top of the principal.
- 5
Compare two scenarios
Change one variable at a time and note the difference in both the monthly payment and the total interest. That trade-off is the actual decision.
Tips and best practices
- Compare offers on APR, not on the headline rate.
- Look at total interest, not just the monthly payment; a longer term always looks cheaper per month and usually costs more overall.
- Even a small regular overpayment early in the term has a disproportionate effect, because it removes interest from every subsequent month.
Frequently asked questions
What formula is used?
The standard amortisation formula: payment equals principal times the monthly rate, divided by one minus one plus the monthly rate raised to the negative number of payments. The monthly rate is the annual rate divided by twelve.
Why is the total interest so much larger than the amount borrowed?
Because interest is charged on the outstanding balance every month for the whole term. At 6 percent over 30 years, the total interest on a large loan approaches the principal itself. Shorter terms reduce it sharply, which is why the term matters as much as the rate.
Why are early payments mostly interest?
Interest is calculated on the balance, and the balance is at its highest at the start. As the principal falls, the interest portion falls with it and more of each payment goes to principal. This is not a lender trick, it is how amortisation works.
What is the difference between the interest rate and the APR?
The interest rate covers the cost of borrowing the money. The APR also includes mandatory fees, so it is the better number for comparing two offers. A low rate with a large arrangement fee can be worse than a slightly higher rate without one.
Does it account for extra payments?
The scheduled payment calculation assumes none. To see the effect of overpaying, reduce the term until the payment matches what you would actually pay, which approximates the same outcome.
Why is my bank's payment slightly different?
Rounding, fees added to the principal, daily rather than monthly interest accrual, and insurance bundled into the payment all shift the figure. Use this as a planning estimate and the lender's schedule as the authority.