Loan Payment Calculator

The monthly payment is determined by the loan amount, interest rate, and term. The formula distributes principal and interest so the loan is fully paid off by the final payment, with early payments being mostly interest.

Extra payments go directly to principal, reducing the balance on which interest accrues. This shortens the loan term and reduces total interest paid. Even one extra payment per year can save thousands on a long-term loan.

Amortization is the process of paying off a loan through regular scheduled payments. Each payment covers the interest due, with the remainder reducing the principal. Over time, the interest portion decreases and the principal portion increases.

A higher interest rate increases the monthly payment and the total amount paid over the life of the loan. On a $20,000 loan over 5 years, the difference between 5% and 9% APR is roughly $40/month and over $2,000 in total interest.

Shorter terms mean higher monthly payments but significantly less total interest. Longer terms lower monthly payments but cost more overall. Choose based on your monthly cash flow needs and the total cost you are willing to accept.