Loan Interest Calculator
Enter your loan amount, annual interest rate, and loan term to see your monthly payment, total interest paid, total repayment cost, and a full amortization schedule. The chart shows how your balance falls over time. Results update as you type.
How loan interest is calculated
Most personal loans, auto loans, and mortgages use the standard amortization formula. Each monthly payment covers the interest that accrued during that month plus a portion of the principal. The monthly payment stays the same throughout the loan, but the split shifts: early payments are mostly interest, while late payments are mostly principal. The monthly interest for any given period is the remaining balance multiplied by the monthly rate (annual rate divided by 12). The fixed monthly payment is computed as: P = (A * r * (1+r)^n) / ((1+r)^n - 1), where A is the loan amount, r is the monthly rate, and n is the number of months.
Principal vs. interest: the amortization effect
Because interest is charged on the outstanding balance, you pay the most interest in the first month and the least in the last month. This is why paying off a loan early, or making extra payments, saves a disproportionate amount of interest: every extra dollar applied to principal immediately reduces the balance on which all future interest is calculated. For a 5-year loan at 6.5%, roughly 55-60% of your first-year payments go to interest. By year 4, that ratio flips and the majority of each payment reduces principal. The amortization schedule in this calculator shows the exact split for every single month of your loan.
How extra payments change the picture
Adding even a small amount to your monthly payment can dramatically cut total interest and shorten the loan. On a $10,000 loan at 6.5% over 5 years, the required monthly payment is about $195. Adding just $50/month shortens the term by about 9 months and saves roughly $175 in interest. The effect compounds because each extra principal payment reduces the balance faster, so subsequent interest charges are lower. Even a one-time lump-sum payment early in the loan has an outsized effect compared to the same payment later, because it reduces the balance that accrues interest for a longer remaining period.
Interest rate vs. total cost: what to watch
A lower interest rate is almost always better, but the loan term matters just as much for total cost. A $20,000 loan at 4% for 10 years costs about $4,300 in interest. The same loan at 6% for 5 years costs only about $3,200 in interest, even though the rate is higher, because the shorter term means less time for interest to accumulate. APR (Annual Percentage Rate) includes fees and is the most useful number for comparing loan offers from different lenders. Always compare APRs, not just stated rates, and use this calculator to compare total interest across different term lengths before choosing.
Typical Loan Interest Rate Ranges (2024-2025)
| Loan Type | Typical APR Range | Common Term | Interest Cost Level |
|---|---|---|---|
| Auto loan (new) | 5% - 8% | 3-7 years | Low-Moderate |
| Auto loan (used) | 7% - 13% | 2-5 years | Moderate |
| Personal loan (excellent credit) | 6% - 12% | 2-7 years | Moderate |
| Personal loan (fair credit) | 15% - 25% | 2-5 years | High |
| Home mortgage (30-year fixed) | 6% - 8% | 30 years | Low (by rate) |
| Student loan (federal) | 5% - 8% | 10-25 years | Moderate |
| Credit card | 20% - 30% | Revolving | Very High |
| Payday loan (annualized) | 200% - 400%+ | 2-4 weeks | Extremely High |
Representative APR ranges by loan type. Your rate depends on credit score, lender, and market conditions.
Frequently asked questions
What is the difference between simple interest and amortized interest?
Simple interest is calculated only on the original principal for each period, so the interest charge is the same every month regardless of how much you have repaid. Amortized interest is calculated on the remaining balance, meaning the interest portion of each payment shrinks as you pay down the principal. Most installment loans (personal, auto, mortgage) use amortization. Simple interest is sometimes used for short-term or informal loans.
Why does the amortization schedule show more interest early and more principal late?
Because interest accrues on the outstanding balance. In month one you owe the full principal, so the interest charge is at its highest. Each payment reduces that balance slightly, so the next month's interest charge is a little lower. Since the total payment stays fixed, the freed-up portion goes to principal, which accelerates the paydown. By the final months, you owe very little, so almost the entire payment goes to principal.
How much money do extra payments save?
It depends on your rate, remaining term, and how early you make the extra payments. The earlier an extra payment is made, the more interest periods it eliminates. As a rough rule, an extra payment equal to one monthly payment per year on a 30-year mortgage can cut the term by 4-6 years and save tens of thousands of dollars in interest. Use the "Extra Monthly Payment" field in this calculator to see the exact savings for your loan.
What is APR and how does it differ from the interest rate?
The interest rate is the basic annual cost of borrowing as a percentage. APR (Annual Percentage Rate) adds origination fees, closing costs, and other charges to give a truer picture of total borrowing cost. For comparing loans from different lenders, always use APR. If a lender quotes only a rate without APR, ask for it specifically, since fees can add thousands to the effective cost.
Does making a payment early in the month save interest?
On most consumer loans the payment date is set and daily accrual is not how interest is calculated, so paying a few days early on an amortized loan typically does not save interest. However, on loans that use daily simple interest (some auto loans and mortgages), paying even a day early reduces the interest owed for that period. Check your loan agreement to determine which method applies.
What happens if I miss a payment?
Missing a payment typically triggers a late fee and, depending on your lender, may cause the missed interest to capitalize (be added to the principal), increasing your balance. Repeated missed payments can damage your credit score and, in severe cases, lead to default. If you are struggling, contact your lender before missing a payment: most offer hardship deferments that are better for your credit than a missed payment.