Case 1
- How much are you borrowing?
- 25000
- What is the annual interest rate?
- 7.5%
- How many monthly payments?
- 60
500.95
Open with these valuesLoan Payment Calculator
500.95
Result: 500.95Principal and interest, nothing else. Enter the annual rate your lender quotes — the calculator divides it by twelve itself. Insurance, arrangement fees and, on a mortgage, property tax are billed alongside the loan and are not in this figure.
Worked examples
Case 2
- How much are you borrowing?
- 5000
- What is the annual interest rate?
- 12%
- How many monthly payments?
- 24
235.37
Open with these valuesCase 3
- How much are you borrowing?
- 300000
- What is the annual interest rate?
- 6.5%
- How many monthly payments?
- 360
1,896.20
Open with these valuesHow it's calculated
M = P × i ÷ (1 − (1 + i)^−n), i = annual rate ÷ 12
- StepEnter the amount actually financed, after any deposit or trade-in.
- StepAdd the nominal annual rate; the calculator divides it by twelve.
- StepEnter the term in months — 60 is five years, 360 is thirty.
- ResultRead the scheduled principal-and-interest payment.
What this number means
This calculator gives the scheduled monthly payment on a fixed-rate instalment loan: the amount financed, the annual rate, the number of monthly payments. Three inputs, one number — and it is the number the repayment schedule is built from. The annuity formula does the work, M = P × i ÷ (1 − (1 + i)^−n), with i the annual rate divided by twelve and n the count of payments. On the defaults, 25,000 at 7.5 % over 60 months comes to 500.95 a month, so 30,056.92 changes hands in total and 5,056.92 of that is interest. Stretch the same loan to 84 months and the payment falls to 383.46 — about 117 a month of breathing room — while the interest rises to 7,210.38. Longer always costs more in total, and the calculator makes that trade visible in one step. At 0 % the divisor is itself zero, so the calculator switches to plain division: 24,000 over 48 months is exactly 500. What the figure leaves out is everything billed alongside the loan — payment protection insurance, arrangement and origination fees, and on a mortgage the property tax and building insurance, which the mortgage calculator includes instead. The limitation that matters most is the assumption of a rate fixed for the whole term. On a variable loan the answer holds only until the first reset; after that, run it again with the new rate and the remaining balance.
Principal and interest, nothing else
Insurance, arrangement fees and, on a mortgage, property tax are billed alongside the loan. For a housing payment that includes tax and insurance, use the mortgage calculator.
APR to compare, nominal rate to compute
The payment schedule is built from the nominal interest rate, so enter that one. The APR is higher wherever arrangement or origination fees exist, which makes it the better number for comparing offers.
Valid only up to the first rate change
The formula assumes the rate is fixed for the whole term. On a variable loan, run it again with the new rate and the remaining balance at every reset.
Zero percent does not break the formula
The divisor (1 − (1 + i)^−n) is itself zero when i is zero, so the calculator switches to plain division. 24000 over 48 months is exactly 500.
Commonly misread
A longer term is the cheaper choice.
A longer term always costs more in total. The same 25000 at 7.5 % costs 500.95 a month over 60 months and 383.46 over 84 — about 117 a month of breathing room for well over two thousand in extra interest.
I should enter the APR, since that is the true rate.
Enter the nominal rate — that is what the payment schedule is built from. Use the APR to compare offers instead.
This is my monthly housing payment.
It is principal and interest only. Property tax and building insurance are billed alongside the loan; the mortgage calculator includes them.
Reference table
| Amount, rate, months | In years | Monthly payment |
|---|---|---|
| 25000, 7.5, 60 | 5 years | 500.95 |
| 25000, 7.5, 72 | 6 years | 432.25 |
| 25000, 7.5, 84 | 7 years | 383.46 |
| 5000, 12, 24 | 2 years | 235.37 |
| 24000, 0, 48 | 4 years | 500.00 |
| 300000, 6.5, 360 | 30 years | 1896.20 |
Questions
How is a monthly loan payment calculated?
With the annuity formula: M = P × i ÷ (1 − (1 + i)^−n), where i is the annual rate divided by twelve and n is the number of monthly payments. For 25000 at 7.5 % over 60 months that gives 500.95 a month.
Should I enter the APR or the interest rate?
Enter the nominal interest rate — that is what the payment schedule is built from. On a loan with no fees the two are the same; where there are arrangement or origination fees the APR is higher because it folds them in. Use the APR to compare offers and the nominal rate to compute the payment.
What happens at 0 % interest?
The payment is simply the amount divided by the number of months, so 24000 over 48 months is exactly 500. The formula divides by (1 − (1 + i)^−n), which is zero when i is zero, so the calculator switches to plain division rather than failing.
What is not included in the payment shown?
Only principal and interest are here. Payment protection insurance, arrangement and origination fees, and on a mortgage the property tax and building insurance are all billed alongside the loan rather than inside it. For a housing payment that includes tax and insurance, use the mortgage calculator.
Should I take a longer term to get a lower payment?
Only if the shorter term genuinely does not fit your budget, because a longer term always costs more in total. The same 25000 at 7.5 % costs 500.95 a month over 60 months, 432.25 over 72 and 383.46 over 84. Two extra years buy about 117 a month of breathing room and add well over two thousand in interest.
Does this work for a variable-rate loan?
Only up to the first rate change, because the formula assumes the rate is fixed for the whole term. Treat the result as the payment that applies while the current rate holds, and run it again with the new rate and the remaining balance at every reset.
Sources and last check
Information, not financial advice.