Loan Payment Calculator
Standard amortization is how virtually every US mortgage, auto loan, and personal loan is structured: a fixed monthly payment in US dollars for the full term, where early payments are mostly interest and later payments are mostly principal. This calculator applies the standard amortization formula and returns your monthly payment ($), total amount paid, total interest, and an estimated Annual Percentage Rate (APR) — the single number the Consumer Financial Protection Bureau (CFPB) and federal Truth in Lending Act require lenders to disclose. Use it to compare mortgage offers, auto financing, and Fed-tracked personal loan rates before signing.
When to use this calculator
- You're about to take a personal loan and want to know the monthly payment.
- You're comparing offers from different banks and want to see which is cheaper.
- You're offered 'zero-interest' installments and want to verify there's no markup.
- You already have a loan and want to calculate the remaining balance if you prepay.
- You're evaluating a mortgage and want to simulate payments.
Example: $250,000 mortgage at 6.5% for 30 years
- Principal: $250,000.
- Annual rate: 6.5% → Monthly rate:
6.5 / 12= 0.542%. - Term: 360 months (30 years).
- Formula:
250,000 x (0.00542 x 1.00542^360) / (1.00542^360 - 1). - Monthly payment: ≈ $1,580.
- Total paid:
1,580 x 360= $568,861. - Total interest:
568,861 - 250,000= $318,861.
How it works
2 min readWhat Is Standard (French) Amortization?
The French amortization system is the most common loan repayment method worldwide. Its distinctive feature is a fixed payment throughout the entire term, making budgeting easy.
What changes month to month is the internal composition:
The Formula
payment = principal x (i x (1+i)^n) / ((1+i)^n - 1)Where:
How Interest Compounds Over Term Length
| Term | Total Interest (at 6.5% annual) |
|---|---|
| 60 months (5 years) | ~17% of principal |
| 120 months (10 years) | ~37% of principal |
| 180 months (15 years) | ~61% of principal |
| 240 months (20 years) | ~88% of principal |
| 360 months (30 years) | ~128% of principal |
> Takeaway: the longer the term, exponentially more interest. If you can afford a higher payment, choose a shorter term.
Interest Rate vs APR — The Key Difference
| Concept | What It Is | What It's For |
|---|---|---|
| Nominal Rate | Base rate without compounding | What banks advertise |
| Effective Annual Rate | Rate with monthly compounding | True cost of money |
| APR (Annual Percentage Rate) | Effective rate + fees + insurance | True cost of the loan |
Always compare by APR, never by the nominal rate alone. A loan at 5.5% nominal can have a higher APR than one at 6% if the first has high origination fees.
Alternative Amortization Methods
| System | Payment | Principal Repaid | Total Interest |
|---|---|---|---|
| French (Standard) | Fixed | Increasing | Higher |
| German (Constant Principal) | Decreasing | Fixed | Lower |
| Interest-Only | Interest only + balloon | None until end | Highest |
Tips for Borrowers
1. Compare APR, not just the rate: two lenders with the same rate can have very different APRs.
2. Choose the shortest term you can afford: you'll pay dramatically less interest.
3. Read the fine print on insurance: mandatory life insurance or payment protection can add 1-3% to your effective cost.
4. Consider prepayment: paying extra toward principal early saves enormous future interest.
5. Fixed vs variable: fixed rates give certainty; variable rates can save money but carry risk.
Prepayment Benefits
Paying an extra $100/month on a $250,000, 30-year mortgage at 6.5%:
Common Mistakes
1. Only comparing monthly payments: a lower payment with a longer term means much more total interest.
2. Ignoring compounding: the difference between 5% and 6% annual rate may seem small, but over 30 years it's tens of thousands.
3. Not reading insurance costs: some lenders bundle expensive insurance that doubles the effective rate.
4. Taking the longest term so the payment fits your budget: if the payment doesn't fit, borrow less.
5. Not prepaying when possible: extra payments at the start save the most due to how amortization works.
Frequently asked questions
What is better: a shorter or longer loan term?
Always the shortest you can comfortably afford. A $250,000 loan at 6.5% for 15 years costs about $61% in interest; for 30 years it's about 128%. The monthly payment is higher with a shorter term, but you pay far less total. If the payment doesn't fit your budget, reduce the loan amount rather than extend the term.
What is APR and why is it so important?
The Annual Percentage Rate (APR) is the true cost of the loan, including the interest rate + origination fees + mandatory insurance + any other costs. It's the only metric you should compare between lenders. Two loans with the same nominal rate can have very different APRs.
Can I prepay my loan early?
In most countries, yes. Some lenders charge a prepayment penalty (typically 1-3% of the prepaid amount), while others allow it freely. Prepaying early saves the most interest because early payments are mostly interest. Always ask about prepayment terms before signing.
Does this payment include insurance?
No, this calculation covers only principal + interest using the standard amortization formula. Lenders often add life insurance (mandatory in many mortgages) and property insurance, which can significantly increase the actual payment.
What is the difference between fixed and variable rate?
A fixed rate stays the same for the entire loan term — your payment never changes. A variable rate adjusts periodically (usually annually) based on a benchmark rate. Variable rates usually start lower but can increase significantly. For long-term loans (mortgages), fixed rates provide certainty; for short-term loans, variable can save money.
How much house can I afford?
A common guideline is the 28/36 rule: your mortgage payment should not exceed 28% of your gross monthly income, and your total debt payments should not exceed 36%. Use this calculator to find the loan amount that produces a payment within those bounds.
What happens if I miss a payment?
The lender charges late fees on the overdue amount. After 30 days, you're in default and it gets reported to credit bureaus, damaging your credit score. After 90+ days, the lender may initiate collection or foreclosure proceedings. Always communicate with your lender before missing a payment — many offer hardship programs.