What a loan really costs each month
Type the amount you want to borrow, how long you will take to pay it back and the yearly interest rate. The calculator gives the monthly payment of a fixed-rate loan with equal payments, the kind most mortgages, car loans and personal loans use. It also shows what the loan costs in interest over its whole life, which is often the more surprising number.
The formula
The monthly payment is M = P × r ÷ (1 − (1 + r) to the power −n), where P is the amount borrowed, r the monthly rate (the yearly rate divided by 12) and n the number of monthly payments. With a rate of 0%, it is simply P ÷ n. Each payment first covers the interest due on what you still owe; the rest pays down the balance. That is why early payments are mostly interest and the last ones mostly principal.
Worked examples
- Mortgage over 20 years. $200,000 over 20 years at 3.5%: $1,159.92 a month, $78,380.66 of interest, $278,380.66 repaid in total.
- The same mortgage over 30 years. $200,000 over 30 years at 3.5%: $898.09 a month, but $123,312.18 of interest. The payment drops by about $262, and the interest goes up by almost $45,000.
- A higher rate. $200,000 over 20 years at 6.5%: $1,491.15 a month and $157,875.11 of interest, about twice the interest at 3.5%.
- Car loan. $25,000 over 5 years (60 months) at 7%: $495.03 a month, $4,701.80 of interest.
These rates are only examples to show how the calculation works, not market rates. The page opens with 6.5%; type the rate you have been offered.
The repayment schedule
Tap Repayment schedule for an amortization table with one line per year: total paid, interest, principal and the balance left at the end of the year. On the 20-year mortgage at 3.5%, the first year’s payments add up to $13,919.03, of which $6,887.92 is interest and $7,031.11 goes to the principal. In the final year, only $260.33 is interest. The table also shows what you would still owe if you sold or refinanced after a few years.
What is not included
The result covers principal and interest only. Insurance, arrangement or origination fees, closing costs and taxes are not included. For a US mortgage, the monthly bill can also include property taxes, homeowners insurance and mortgage insurance, often paid through an escrow account. The APR (annual percentage rate) a lender quotes adds some of the fees to the interest rate, so it is usually a little higher: type the interest rate here to get the payment, and use the APR to compare offers. If your rate can change, as with an adjustable-rate mortgage or a tracker, the result holds only while the rate stays the same.
Reading the numbers
- Length against total cost. A longer loan lowers the monthly payment but raises the total interest. Try a few lengths to find the balance that suits your budget.
- Months for short loans. Tap “years” to switch to “months”: a 36-month loan of $15,000 at 8% costs $470.05 a month.
- Can you afford it? Compare the payment with your monthly take-home pay: the UK take-home pay calculator estimates it, and the hourly to salary calculator turns any pay into a monthly figure.
- Saving instead? The compound interest calculator shows the same mechanism working for you rather than against you.
Shorter or longer: an example
Borrowing $25,000 at 7%, a 4-year loan costs $598.66 a month and $3,735.49 of interest in total; a 5-year loan costs $495.03 a month and $4,701.80 of interest. The extra year lowers the payment by about $104 and adds about $966 of interest. At 5% over 5 years, the payment would be $471.78 and the interest $3,306.85: on a car loan, the rate often matters as much as the length.
The calculator handles loans of up to 50 years (600 months). Your numbers stay in your browser, and the Share button creates a link that opens the same calculation, handy to send to a partner or a broker. Currency, in the bottom bar, switches the symbol between $, £, €, C$ and A$.