Loan Payment Calculator

Monthly loan payments are calculated using the standard fixed-rate amortization formula: M = P × [r(1+r)^n] ÷ [(1+r)^n − 1]. Here P is the loan principal, r is the monthly interest rate (annual rate ÷ 12), and n is the total number of monthly payments. For a $25,000 loan at 6.5% over 60 months, r = 0.065 ÷ 12 = 0.005417 and n = 60. This formula produces a fixed amortizing payment — every payment is the same dollar amount, but the split between interest and principal shifts each month. In the first payment, the majority covers the interest that has accrued on the full balance. As the principal is gradually reduced by each payment, each subsequent month carries less interest and more principal reduction. By the final payment, nearly the entire amount goes directly to the remaining principal. Total interest paid is calculated by multiplying the monthly payment by the number of payments, then subtracting the original principal: Total Interest = (M × n) − P. Interest as a percentage of the loan is also displayed to allow direct comparison between different rate and term combinations — a useful metric when evaluating whether the convenience of a longer term justifies its additional cost. Even a modest increase in monthly payment significantly reduces total interest when applied consistently throughout the loan.