How to Calculate Loan Payments (Formula + Free Calculator)
Understand the monthly loan payment formula, how interest compounds, and use a free calculator to see your monthly payment, total interest, and total cost.
Before signing any loan — mortgage, car, personal — knowing the real monthly payment and the total interest paid over the life of the loan is the single most useful number you can calculate.
The amortization formula
M = P × [r(1 + r)ⁿ] ÷ [(1 + r)ⁿ − 1], where P is the principal, r is the monthly interest rate (annual rate ÷ 12), and n is the number of monthly payments.
Worked example
Borrow $20,000 at 6% APR for 5 years: r = 0.005, n = 60. Monthly payment ≈ $386.66. Total paid ≈ $23,200, of which $3,200 is interest.
Use the free calculator
Skip the algebra and use our Loan Payment Calculator — enter amount, rate, and term, and it shows the monthly payment, total interest, and total cost. Adjust any input to see how it changes the others.
Two numbers that change everything
- Interest rate: even a 1% difference on a 30-year mortgage can cost tens of thousands of dollars
- Term length: longer terms lower the monthly payment but dramatically increase total interest
Related calculators
Comparing APRs or down-payment percentages? Use Percentage Calculator. Negotiating a discount on the purchase price first? Try Discount Calculator to see your real out-the-door cost.