Calculate monthly payments, total interest, and loan details
Understanding how loan amortization works is key to making informed borrowing decisions. With a standard amortizing loan, each monthly payment covers both interest and a portion of the principal. Early in the loan term, most of your payment goes toward interest. Over time, the balance shifts so that more of each payment reduces the principal. This calculator uses the standard amortization formula to show your exact monthly payment, total interest, and total cost.
Three factors determine your monthly payment: the loan amount (principal), the annual interest rate, and the loan term in years. A higher principal or interest rate increases monthly payments, while a longer term lowers them but raises the total interest paid over the life of the loan. Even a small rate difference -- say 5% versus 6% -- can add up to thousands of dollars on a large loan.
Fixed-rate loans keep the same interest rate for the entire term, giving you predictable payments. Variable-rate loans may start lower but can fluctuate with market conditions. To secure better terms, improve your credit score, compare offers from multiple lenders, consider a shorter loan term, and make a larger down payment when possible.