Loan Calculator

A loan is a simple bargain with a complicated middle. You borrow an amount, you repay it in equal monthly instalments, and the lender charges interest on whatever is still outstanding. This calculator works out any part of that bargain from the rest.

Enter any three of loan amount, interest rate, term, and monthly payment, and the fourth fills in. That covers the usual question, what will this cost me each month, and the ones people actually ask next: how much can I borrow at this payment, how long will it take, and what rate am I really being charged.

The loan payment formula

Every fixed-rate amortising loan runs on one equation. The monthly payment depends on the amount borrowed, the monthly interest rate, and the number of payments.

Here M is the monthly payment, P is the loan amount, i is the monthly interest rate (the annual rate divided by 12 and by 100), and n is the total number of payments.

A worked example. Borrow 600 at 12 percent over one year. The monthly rate is 0.01 and there are 12 payments,

which gives a payment of about 53.31. Over the year that totals about 639.71, so roughly 39.71 is interest.

If for 3 Years, the payment would be:

Solving for the other three

The same equation rearranges. Given a payment you can afford, it returns the amount you could borrow. Given an amount and a payment, it returns how long repayment takes.

The interest rate is the awkward one. It cannot be isolated algebraically, so it has to be found by narrowing in on it numerically. That is what this calculator does when you leave the rate blank, and it is why entering an amount, a payment, and a term will tell you the rate you are actually being charged. That is a useful check when a lender quotes a monthly figure without a clear rate attached.

How to use this calculator

1. Enter the loan amount, the annual interest rate, and the term in years to get the monthly payment.

2. To run it backward, leave any one of the four fields blank and fill in the other three.

3. Read the total interest and total cost underneath. They are usually more revealing than the payment.

4. Turn on Add an extra monthly payment to see how much time and interest a little extra clears.

Why the total cost matters more than the payment

Lengthening the term lowers the monthly payment, which is why it is the first thing offered when a payment looks too high. It also raises the total interest, often substantially, because the balance sits outstanding for longer.

Compare the same loan over three years and over six. The monthly figure drops a long way; the total paid climbs. Neither is the right answer on its own. The point is to make the trade deliberately rather than accept whichever payment fits this month.

What an extra payment does

An extra amount paid each month goes straight against the principal, which reduces the balance that interest is charged on for every remaining month. The effect compounds, so small consistent overpayments cut the term by more than most people expect.

• Check for early repayment charges first. Some loans penalise clearing the balance ahead of schedule.

• Confirm the lender applies the extra to principal rather than holding it against next month's payment.

• Overpaying a high-rate debt usually beats saving the same amount, because the guaranteed interest saved is higher than a typical deposit rate.

Rate, APR, and what the quote leaves out

The rate in this calculator is the nominal annual interest rate. The APR is a broader figure that also folds in arrangement fees and certain compulsory charges, which is why an APR is usually a little higher than the headline rate.

Two loans with the same rate can have different APRs, and the APR is the number to compare when shopping around. This calculator works on the interest rate itself, so add any fees separately when you are weighing one offer against another.