How to use the Loan Repayment Calculator
- Enter the amount borrowed.
- Enter the annual interest rate as quoted.
- Enter the term in years — decimals are fine for part-year terms.
- Compare payment and total interest across two or three term options before committing.
How the calculation works
Every fixed-rate installment loan uses the same annuity formula regardless of what the money buys. Each payment covers accrued interest first, and the remainder reduces principal, so the interest share falls steadily while the principal share grows.
Term length has an asymmetric effect: stretching a loan from three years to six roughly halves the payment but more than doubles the interest, because the balance stays outstanding twice as long. This is the single most common financing mistake.
APR and nominal rate differ whenever fees exist. If your offer includes fees, add them to the amount borrowed to approximate the effective cost rather than trusting the headline rate.
M = P × [r(1 + r)ⁿ] ÷ [(1 + r)ⁿ − 1]Source: Standard annuity-immediate formulation, Society of Actuaries financial mathematics syllabus.
Worked example
$20,000 borrowed at 7.9% over 5 years.
- Monthly rate is 0.6583% across 60 payments.
- Payment is about $404.
- Total repaid is around $24,250.
$4,250 of interest, roughly 21% of the amount borrowed.
Frequently asked questions
Why does my first payment barely reduce the balance?+
Interest accrues on the full balance at the start, so early payments are interest-heavy by construction.
What is the difference between APR and interest rate?+
The interest rate prices the borrowing; APR folds in mandatory fees to give a comparable total-cost figure.
Does making payments early each month help?+
Slightly, on loans with daily interest accrual. On monthly-accrual loans it makes no difference.
Last reviewed September 1, 2026. We review this page whenever the underlying formula, tax year, published rate or standard changes.