In Short
A loan's monthly payment is the amount × r ÷ (1 − (1 + r)^−n), where r is the yearly rate ÷ 12 and n is the number of payments. $25,000 at 8.5% for 5 years is $512.91 a month and $5,774.80 of interest. Adding $100 a month pays it off 11 months sooner and saves $1,166.08.
How to Use the Loan Calculator
- Enter the loan amount, the interest rate and the term in years or months.
- Optionally add an extra monthly payment to see the new payoff date and the interest saved.
- Open the amortization schedule to see each year, then tap a year to see every month.
- Or tap Say It All and describe the loan: “Borrow 25 thousand at 7.5 percent over 5 years, with an extra 100 a month.”
The Formula
Each payment is the same. Early payments are mostly interest, because interest is charged on a bigger balance; later payments are mostly principal. An extra payment goes straight to principal, so every later month charges less interest.
- Monthly rate r = yearly rate ÷ 12
- Payment = amount × r ÷ (1 − (1 + r)^−n)
- Interest this month = balance × r
- Principal this month = payment − interest (+ any extra payment)
- Total interest = sum of the monthly interest
Worked Examples
| Scenario | Inputs | Result |
|---|---|---|
| Equipment or personal loan | $25,000 at 8.5% for 5 years | $512.91 a month · $5,774.80 interest · $30,774.80 total |
| Same loan, $100 extra a month | $25,000 at 8.5% for 5 years + $100/mo | Paid off in 49 months · $4,608.72 interest · $1,166.08 saved |
| Vehicle loan | $35,000 at 7.5% for 72 months | $605.15 a month · $8,571.08 interest |
| 30-year loan | $200,000 at 6.5% for 30 years | $1,264.14 a month · $255,088.98 interest; $200 extra a month saves $90,076.78 and 110 months |
Illustrative examples, not projections. Figures use the tax year shown and the assumptions above.
How Is a Loan Payment Calculated?
Most installment loans are amortized: the payment stays the same and is set so the last payment brings the balance to zero. The calculator uses the standard formula above with the rate split into monthly pieces.
The rate you enter here is the interest rate. A lender's APR also counts certain fees, so the APR on a loan offer is usually a little higher than its interest rate; compare APR to APR across offers [1][4].
How Much Does an Extra Payment Save?
An extra payment lowers the balance right away, so every later month charges interest on less money. That's why a small extra payment early in a long loan saves the most: $200 a month on a $200,000, 30-year loan at 6.5% saves about $90,000 of interest.
Some loans charge a prepayment penalty for paying off all or a large part of the balance early, often in the first few years. The loan's terms say whether one applies [2].
What Are Typical Loan Rates Right Now?
The Federal Reserve publishes average rates at commercial banks. In August 2026 the average was 11.90% for a 24-month personal loan and 7.54% for a 60-month new car loan [3]. Your rate depends on your credit, the lender and the loan.
Frequently Asked Questions
What is the monthly payment on a $25,000 loan?
At 8.5% for 5 years it's $512.91 a month, with $5,774.80 of interest in total. At 7.5% for 5 years it's $500.95 a month.
What is the payment on $200,000 at 6.5% for 30 years?
$1,264.14 a month for principal and interest. Over 30 years that's $255,088.98 of interest, $455,088.98 in total.
Does paying extra on a loan reduce the interest?
Yes, when the extra goes to principal. It lowers the balance that interest is charged on. $100 extra a month on a $25,000, 5-year loan at 8.5% saves $1,166.08 and ends the loan 11 months early.
What is the difference between the interest rate and the APR?
The interest rate is the cost of borrowing the money. The APR adds certain lender fees, such as points or origination charges, so it is usually higher and is the better number for comparing offers [1][4].
What is an amortization schedule?
A table of every payment showing how much goes to interest, how much to principal and the balance left. Early payments are mostly interest; later ones are mostly principal.
Sources
- What is the difference between a mortgage interest rate and an APR? — Consumer Financial Protection Bureau
- What is a prepayment penalty? — Consumer Financial Protection Bureau
- Consumer Credit – G.19 (terms of credit at commercial banks) — Board of Governors of the Federal Reserve System
- What is the difference between a loan interest rate and the APR? — Consumer Financial Protection Bureau
Official sources only: the IRS, SSA, BLS and other government agencies. Read how Zentavos researches.