Loan Calculator

How to use this calculator

1. Pick the kind of loan: amortized (paid off in instalments), deferred payment (one lump sum at the end) or bond (a set amount due at maturity).
2. Enter the amount — the sum you plan to borrow, or, in bond mode, the amount that falls due at maturity.
3. Set the annual interest rate the lender is quoting and how often it compounds.
4. Choose the term in years, plus any extra months, and — for an amortized loan — how often you pay back.
5. Read the headline figure and the totals, then open the schedule and switch between the annual and monthly views.

Every figure is derived from one effective annual rate, so the compounding and payback settings genuinely change the answer rather than relabelling it. Change any input and the result and both schedules update, letting you compare offers side by side.

What an amortizing loan is

An amortizing loan is repaid in equal instalments that each cover the month's interest first, with whatever is left reducing the balance. Because the payment is fixed but the balance keeps shrinking, the split shifts over time: early payments are mostly interest, and later ones are mostly principal. By the final payment the balance — and the interest charged on it — has fallen to almost nothing.

That front-loaded interest is why the total you repay is larger than the amount you borrowed, and why paying extra early has an outsized effect. Every dollar you add goes straight to principal, which lowers the interest charged on every remaining payment.

The three kinds of loan

An amortized loan is repaid in equal instalments from the first period. Borrow $100,000 at 6% over 10 years and the payment is $1,110.21 a month; the 120 payments come to $133,224.60, of which $33,224.60 is interest. This is the shape of most personal loans, car loans and mortgages.

A deferred payment loan repays nothing until the end. The same $100,000 at an effective 6% grows untouched for 10 years and $179,084.77 falls due at maturity — $79,084.77 of interest, more than twice the amortized figure. Nothing is ever paid down, so every period's interest is charged on a larger balance than the last.

A bond reverses the question. You know the amount due at maturity and want today's value of it: $100,000 due in 10 years at an effective 6% is worth $55,839.48 now. That is how zero-coupon bonds are priced — bought at a discount, redeemed at face value — and the $44,160.52 gap is the interest earned.

Why compounding changes the answer

A quoted rate means different things at different compounding frequencies, so the calculator normalises whatever you choose into one effective annual rate before deriving anything from it. 6% compounded monthly is an effective 6.168% a year; 6% compounded daily is 6.183%; 6% quoted as APY is already 6%.

The differences look small on a rate card and are not small over a term. Choose the frequency your lender actually quotes — monthly (APR) for most consumer loans, annually for an APY figure — and compare offers on the effective rate rather than the headline one.

Reading the annual and monthly schedules

Both views show the same three columns: the balance the period begins on, the interest charged for it, and the balance it ends on. The annual schedule gives one row per year — the fastest way to see the shape of the loan. The monthly schedule gives every period, with a Year #N End row closing each year so you can still find the annual figures inside the detail.

On an amortized loan the ending balance falls to $0 on the final row. On a deferred loan or a bond it climbs to the amount due at maturity, because nothing is repaid until then.

The loan payment formula

The fixed monthly payment comes from the standard amortization formula:

M = P · r · (1 + r)ⁿ / ((1 + r)ⁿ − 1)

• M — the monthly payment (the figure being solved for)
• P — the principal, or amount borrowed
• r — the monthly interest rate (annual rate ÷ 12)
• n — the total number of payments (years × 12)

Each month the interest due is the current balance times r, and the rest of the payment reduces the balance. The calculator repeats that step across every month to build the schedule and total the interest.

Dividing the annual rate by 12 is exact only when interest compounds monthly, which is the calculator's default. Choose a different compounding frequency, or a payback frequency other than monthly, and r becomes the equivalent rate for one period of the effective annual rate instead — the same formula, applied to the period you actually pay in.

A worked example

Borrow $25,000 at 8% over 5 years. The monthly rate is 0.08 ÷ 12 ≈ 0.00667 and there are 60 payments, giving a monthly payment of about $506.91. In the first month, interest is $25,000 × 0.00667 ≈ $166.67, so about $340 of that first payment reduces the balance.

Over the full term you repay roughly $30,415 — about $5,415 of it interest on top of the $25,000 you borrowed. The yearly schedule shows the interest portion of each payment shrinking as the balance comes down.

How the term changes the cost

A longer term lowers the monthly payment but raises the total interest, because you borrow the money for longer. Using the same $25,000 at 8%:

Term	Monthly payment	Total interest
3 years	$783.41	$3,202.73
5 years	$506.91	$5,414.59
7 years	$389.66	$7,731.05

Stretching from 3 to 7 years cuts the payment by about $394 a month but more than doubles the interest, from roughly $3,200 to $7,700. The monthly payment is the number you feel; the total interest is the number that actually measures the cost of the loan.

Interest rate versus APR

This calculator uses the interest rate — the cost of borrowing the principal. A loan's APR (annual percentage rate) also folds in certain fees, so it is usually a little higher and is the better figure for comparing offers. When you shop lenders, line up APRs for the same loan amount and term rather than chasing the lowest advertised rate.

Tips and limitations

• Compare total interest, not just the monthly payment — a low payment over a long term can cost far more.
• Even a 0.5% lower rate adds up over the life of a loan; get quotes from several lenders.
• Extra payments toward principal shorten the term and cut total interest — check for prepayment penalties first, as a few loans charge them.
• The tool assumes a fixed rate for the whole term. It does not model origination fees, variable rates, late fees or insurance, so a real APR may run slightly higher.
• Deferred and bond figures assume interest simply accrues to maturity with no payments and no early redemption.

To see exactly how each payment splits between principal and interest, use the amortization calculator; to solve for a payoff time from a payment you can afford, try the payment calculator. This tool provides estimates for planning only and is not a loan offer or financial advice.