Loan Calculator | Free Monthly Payment & Amortization Tool
Calculate loan payments, see how much you can borrow, and discover how extra payments save you money.
📖 Want to understand your results?
Read our complete guide to the Loan Calculator — with real-world examples, expert insights, and pro tips.
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How Loan Payments Work
Your monthly loan payment consists of principal and interest. In the early years, most of your payment goes toward interest. As the principal decreases, more of your payment goes toward the principal. This is known as amortization.
Loan Payment Formula
Where: M = Monthly Payment, P = Loan Principal
r = Monthly Interest Rate (Annual ÷ 12)
n = Total payments (Years × 12)
For example, a $25,000 car loan at 5% for 5 years (60 months): monthly payment = $472. Total interest paid over the life of the loan: $3,306.
Understanding Amortization
Amortization is the process of spreading out a loan into a series of fixed payments over time. Each payment covers the interest due and reduces the principal balance. An amortization schedule shows exactly how much of each payment goes to interest vs. principal.
| Year | Payment | Interest | Principal | Balance |
|---|---|---|---|---|
| 1 | $5,661 | $1,227 | $4,434 | $20,566 |
| 2 | $5,661 | $987 | $4,674 | $15,892 |
| 3 | $5,661 | $735 | $4,926 | $10,966 |
| 4 | $5,661 | $469 | $5,192 | $5,774 |
| 5 | $5,661 | $188 | $5,473 | $0 |
* $25,000 loan at 5% for 5 years — sample amortization
How Much Can You Afford?
As a general rule, your monthly loan payment should not exceed 10-15% of your monthly take-home pay for a car loan, or 36% of your gross income for total debt payments (including mortgage, car, and student loans). Use our affordability calculator to find the right loan amount for your budget.
How Extra Payments Save You Money
Making extra payments toward your principal reduces the total interest you pay and shortens your loan term. Even small additional payments can make a significant difference:
| Extra Payment | Interest Saved | Term Shortened |
|---|---|---|
| $25/month | $501 | 7 months |
| $50/month | $903 | 13 months |
| $100/month | $1,539 | 22 months |
| $200/month | $2,470 | 34 months |
* $25,000 loan at 5% for 5 years
Loan Calculator Pros & Cons
Pros
- ✅ Instant monthly payment & total interest
- ✅ Affordability & extra payment modes
- ✅ Free forever — no subscriptions
- ✅ Works offline after page load
- ✅ No sign-up or email required
Cons
- ✗ No Excel/CSV export option
- ✗ No dedicated mobile app
Frequently Asked Questions
How do I calculate monthly loan payments?
Use the amortization formula: M = P × [r(1+r)^n] / [(1+r)^n − 1], where M = monthly payment, P = principal, r = monthly interest rate (annual rate ÷ 12), and n = total number of payments (years × 12). For a $30,000 loan at 6% for 5 years: monthly payment = $580. Our calculator does this instantly.
How much can I borrow based on my monthly payment?
Our affordability calculator reverse-engineers the loan formula. Enter your desired monthly payment, interest rate, and term to find the maximum loan amount. For example, a $500/month payment at 6% for 5 years means you can borrow approximately $25,900.
How do extra payments save money?
Extra payments reduce your principal faster, which means less interest accrues. On a $30,000 loan at 6% for 5 years: paying an extra $50/month saves $647 in interest and pays off the loan 8 months early. Paying $100/month extra saves $1,129 and pays off 14 months early.
Reviewed by James Rodriguez, CFA
Finance & Investment AnalystChartered Financial Analyst with 10+ years in investment research and financial planning.
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