Personal Loan Calculator

How the monthly payment formula works

Fixed-rate personal loans use the standard 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 divided by 12), and n is the total number of monthly payments.

Each monthly payment covers both interest on the outstanding balance and a portion of principal. Early in the schedule most of the payment goes to interest; over time the interest share shrinks and more goes to principal reduction.

When the annual rate is zero the formula simplifies to dividing the principal evenly across all months.

Understanding the amortization schedule

The amortization schedule breaks every payment into its principal and interest components and shows the remaining balance after each month. Reviewing it helps you see exactly when the loan crosses the halfway point and how quickly the balance falls in the final years.

If you add extra monthly payments, the schedule recalculates automatically. Extra payments go directly to principal, which reduces the balance that accrues interest in future months and can significantly shorten the payoff timeline.

Comparing offers and making decisions

Total interest paid over the life of the loan is often more useful than the monthly payment alone when comparing offers. A lower monthly payment with a longer term can cost substantially more in total interest.

Try adjusting the term and rate to see how each variable affects the total cost. Even a small rate reduction or a shorter term can save hundreds or thousands in interest over the life of the loan.

Worked example: 10,000 borrowed over three years

Suppose you borrow 10,000 at a fixed 6% annual rate over 36 months. The monthly payment works out to about 304.22, which produces a total repayment a little under 10,952 and total interest of roughly 952 over the full term.

If you add 100 extra each month, the loan pays off earlier and the total interest falls because more of each payment reaches principal sooner. That is why the calculator shows both the standard plan and the optional extra-payment comparison.

Limitations of this calculator

This calculator assumes a fixed interest rate for the full term and does not account for origination fees, late-payment penalties, variable-rate adjustments, or prepayment penalties that some lenders may charge.

It is intended for estimation and comparison purposes only. Actual loan terms, approval, and APR depend on the lender, your credit profile, and other factors not modelled here.