How to use the Loan Calculator
- 1
Choose your currency and type the amount you want to borrow.
- 2
Set the yearly interest rate from the lender's quote, then enter the term in years or months.
- 3
Pick how often you will pay: monthly, every two weeks or weekly.
- 4
If the lender charges an arrangement, origination or documentation fee, enter it and say whether you pay it upfront or add it to the loan.
- 5
Check the payment, total interest, cost of borrowing and APR, then open any year in the schedule to see each payment.
The loan payment formula, step by step
Most consumer loans are amortizing: every payment is the same size and covers that period's interest plus a slice of the balance. The payment is P × i ÷ (1 − (1 + i)^−n). P is the amount borrowed, i is the rate per payment period (the yearly rate divided by the number of payments in a year) and n is the total number of payments.
Say you borrow $20,000 at 9% a year over 5 years, paid monthly. The periodic rate is 0.09 ÷ 12 = 0.0075 and there are 60 payments. The formula gives a monthly payment of $415.17. In month one, interest is $20,000 × 0.0075 = $150.00, so $265.17 goes toward the balance. Over the full term you pay $24,910.03, which means the loan costs $4,910.03 in interest.
If the rate is 0%, as with some retailer finance offers, the formula would divide by zero, so the calculator simply splits the amount evenly across the payments.
Choosing a term: lower payment or lower total cost
Stretching a loan makes each payment smaller, but you pay interest for longer. Here is the same $20,000 at 9% over three terms:
| Term | Monthly payment | Total interest |
|---|---|---|
| 3 years | $635.99 | $2,895.81 |
| 5 years | $415.17 | $4,910.03 |
| 7 years | $321.78 | $7,029.65 |
Going from 3 to 7 years drops the payment by $314.21 a month and more than doubles the interest. For a car, a longer term can also leave you owing more than the vehicle is worth for several years, which matters if you sell it or it is written off. A good rule is to choose the shortest term whose payment you can comfortably cover after essentials and savings.
Monthly, bi-weekly or weekly payments
Paying more often means interest is charged on a slightly smaller balance each time. With true bi-weekly amortization, the same $20,000 at 9% over 5 years needs 130 payments of $191.31 and costs $4,870.38 in interest. Weekly, it is 260 payments of $95.59 and $4,853.38 in interest. That saves around $40 to $57 compared with monthly, which is real but small.
The bigger saving people talk about comes from accelerated bi-weekly plans, where you pay half the monthly amount every two weeks. Because a year has 26 fortnights, that adds up to 13 monthly payments a year instead of 12, so the loan is paid off early. This calculator models the standard version, so to estimate an accelerated plan, compare the results with an extra payment or a shorter term. Not every lender accepts bi-weekly or weekly payments, and some charge for setting them up.
Fees and APR: the true cost of borrowing
The quoted interest rate ignores fees. APR (annual percentage rate) folds them in by finding the yearly rate at which your payments exactly repay the money you actually received. This calculator solves for that rate numerically and multiplies the periodic rate by the number of payments per year, the same way US lenders state APR for regular-payment loans.
Take the $20,000 loan at 9% over 5 years with an $800 fee paid upfront. You still make 60 payments of $415.17, but you only have $19,200 in hand once the fee is paid. The rate that balances those figures is an APR of 10.76%. The total cost, counting the fee, is $25,710.03.
If the $800 is added to the loan instead, you borrow $20,800. The payment rises to $431.77, interest rises to $5,106.43 and the APR is 10.69%. Financing the fee costs more in total because you pay interest on it, but it keeps cash in your pocket today.
- In the US, lenders must show APR on a Truth in Lending disclosure.
- In the UK the figure is also called APR, and in the EU it is the APRC (annual percentage rate of charge). Both are based on an effective annual rate, so they can read slightly higher than the US-style figure shown here.
- Whatever the country, compare offers on APR and total cost, not on the headline rate alone.
Limits of this loan calculator
The results assume a fixed rate, payments made in full and on time, and interest charged each period on the remaining balance. Variable-rate loans, interest-only periods, balloon payments, payment holidays, insurance add-ons and late fees are not modelled. Some lenders also calculate interest daily, which shifts the figures by a little each month.
Treat the numbers as an estimate to help you plan and compare. They are not financial advice or a credit offer, and your lender's agreement and disclosure documents are what count.
Frequently asked questions
How do I calculate the monthly payment on a loan?
Divide the yearly rate by 12 to get the monthly rate i, then use payment = P × i ÷ (1 − (1 + i)^−n), where n is the number of months. For $20,000 at 9% over 60 months that is $415.17. The calculator does this instantly for any amount, rate and term.
What is the difference between interest rate and APR?
The interest rate is what the lender charges on the balance. APR also counts upfront fees, so it shows the full cost as a yearly rate. A loan with a lower rate but a large fee can end up with a higher APR than a fee-free loan.
Does paying bi-weekly save money?
Paying every two weeks under a standard schedule saves a little interest because the balance falls slightly faster. The larger saving comes from accelerated plans, where half the monthly amount every two weeks adds up to one extra monthly payment each year. Check that your lender applies the payments as they arrive.
Is it better to pay a loan fee upfront or add it to the loan?
Paying upfront is cheaper overall because you avoid interest on the fee. Adding it to the loan keeps your cash, but you pay interest on it for the whole term. Enter the fee both ways and compare the total cost figure.
Can I pay off my loan early?
Many loans allow it, but some charge an early repayment or prepayment fee, so read your agreement first. Paying early always cuts the remaining interest on an amortizing loan. In the UK, consumer credit rules limit what lenders can charge for early settlement.
Why does the total interest change when I change the term?
Interest is charged on the outstanding balance for every period it is outstanding. A longer term keeps the balance higher for longer, so you pay interest on it more times, even though each payment is smaller.
Last updated on November 9, 2026