Whether it's a personal loan, an auto loan, or a business term loan, most fixed-rate instalment loans work the same way under the hood: a level monthly payment that covers interest on the current balance and steadily pays down principal until the loan reaches zero. This calculator works for any of them — and it also surfaces something the interest rate alone won't tell you: the effective APR once an origination fee is factored in.
How to Use This Loan Calculator
Enter the amount you're borrowing, the annual interest rate (APR), and the term in months. If your loan includes an origination fee — common with personal loans — enter it too; the calculator shows how much cash you'll actually receive and what that fee does to your true cost of borrowing. Add an extra monthly payment to see how much sooner you'd be debt-free and how much interest you'd avoid.
How Loan Payments Are Calculated
Like a mortgage, an instalment loan is amortized: the payment stays level, but the interest and principal portions shift every month as the balance falls. The amount of interest owed each month is simply the remaining balance multiplied by the monthly rate, so a larger balance early in the loan means a larger interest share of that month's payment.
Loan Payment Formula
M = L × [ i(1 + i)^n ] / [ (1 + i)^n − 1 ]
L is the loan amount, i is the monthly interest rate, and n is the number of monthly payments. When an origination fee is present, the effective APR is solved separately: it's the rate that makes the present value of your payment stream equal to the amount you actually received, rather than the amount you're contractually repaying.
Example Calculation
A $25,000 loan at 8% APR over 5 years (60 months) has a monthly payment of about $507, with total interest of roughly $5,404 over the life of the loan. Add a $500 origination fee, and the amount actually disbursed drops to $24,500 — while the required payment stays the same, because it's still based on the full $25,000 owed. That gap between what you owe and what you received is what pushes the effective APR above the stated 8%.
What Affects the Total Cost of a Loan
- Interest rate — the single biggest lever on total interest paid.
- Term length — a longer term lowers the monthly payment but increases total interest, since the balance stays higher for longer.
- Origination fees — reduce the cash you receive without reducing what you owe, which is why comparing loans by APR (not just the interest rate) matters.
- Extra payments — any amount paid above the required payment goes straight to principal, shortening the loan and cutting future interest.