Calculate monthly loan payments, total interest, and loan terms for any type of loan. Compare different payment schedules and loan options to find the best financing solution.
A loan is a contract between a borrower and a lender in which the borrower receives an amount of money (principal) that they are obligated to pay back in the future. Most loans can be customized based on various factors including loan amount, interest rate, loan term, and payment frequency.
Understanding the mathematics behind loan calculations can help you make informed financial decisions and potentially save thousands of dollars over the life of your loan.
Where: M = Monthly payment, P = Principal, r = Monthly interest rate, n = Number of payments
The total amount paid in interest over the life of the loan
The true cost of borrowing including fees and charges
| Loan Type | Typical Term | Interest Rate Range | Collateral |
|---|---|---|---|
| Personal Loan | 2-7 years | 5-36% | Unsecured |
| Auto Loan | 3-7 years | 3-10% | Vehicle |
| Mortgage | 15-30 years | 3-8% | Real Estate |
| Business Loan | 1-25 years | 4-30% | Varies |
| Student Loan | 10-25 years | 3-12% | Unsecured |
| Credit Score Range | Personal Loan Rate | Auto Loan Rate | Mortgage Rate |
|---|---|---|---|
| 800-850 (Excellent) | 5-10% | 3-5% | 3-4% |
| 740-799 (Very Good) | 8-15% | 4-6% | 3.5-4.5% |
| 670-739 (Good) | 12-20% | 5-8% | 4-5% |
| 580-669 (Fair) | 18-25% | 8-12% | 5-6% |
| 300-579 (Poor) | 25-36% | 12-18% | 6-8% |
| $200,000 at 6% Interest | 15 Years | 20 Years | 30 Years |
|---|---|---|---|
| Monthly Payment | $1,688 | $1,433 | $1,199 |
| Total Interest | $103,788 | $143,868 | $231,676 |
| Total Paid | $303,788 | $343,868 | $431,676 |
| Interest Savings vs 30yr | $127,888 | $87,808 | Base |
Predictable payments, protection from rate increases
Lower initial rates, but payments can increase
Compare APR, Not Just Interest Rate: APR includes fees and gives a true cost comparison.
Get Multiple Quotes: Rates can vary significantly between lenders.
Check Your Credit Score: Higher scores qualify for better rates.
Consider Loan Term: Shorter terms mean higher payments but less total interest.
Read the Fine Print: Look for prepayment penalties, origination fees, and other costs.
Focusing Only on Monthly Payment: Longer terms cost more in total interest.
Not Shopping Around: Rates can vary by 1-2% between lenders.
Ignoring Fees: Origination fees, prepayment penalties can add thousands.
Borrowing Too Much: Keep debt-to-income ratio below 36-40%.
Not Reading Terms: Understand all conditions before signing.
| DTI Ratio | Rating | Loan Approval | Interest Rates |
|---|---|---|---|
| Below 20% | Excellent | Easy approval | Best rates |
| 20-36% | Good | Good approval odds | Competitive rates |
| 37-42% | Acceptable | Moderate approval | Higher rates |
| 43-50% | Poor | Difficult approval | High rates |
| Above 50% | Very Poor | Very difficult | Very high rates |
Early Payments: Mostly interest, small principal reduction.
Mid-Term Payments: More balanced between interest and principal.
Late Payments: Mostly principal, small interest portion.
Key Insight: Extra principal payments in early years have the biggest impact on total interest paid.