Content and calculation method reviewed: 10 October 2026
How does a loan calculator work?
A loan calculator estimates the scheduled payment required to repay borrowed money over a selected period. It combines the amount borrowed, annual interest rate and repayment term using a standard amortization formula.
Each scheduled payment contains interest and principal. Interest represents the cost of borrowing, while principal is the portion of the payment that reduces the outstanding loan balance.
Loan payment formula
In this formula:
- P is the amount borrowed;
- r is the monthly interest rate;
- n is the total number of monthly payments.
The calculator converts the annual interest rate into a monthly decimal rate by dividing it by 12 and by 100.
Worked loan example
Suppose you borrow 250,000 at an annual interest rate of 10% and repay the loan over 5 years.
The estimated monthly principal-and-interest payment is approximately:
5,311.76 per month
Across 60 payments:
- total repayment is approximately 318,705.67;
- total interest is approximately 68,705.67.
The figures use the same currency as the amount you enter. Fees and other lender-specific charges are not included.
How is interest calculated on an amortized loan?
For an amortized loan, interest is generally calculated from the outstanding balance during each repayment period.
Near the beginning of the loan, the outstanding balance is still high, so the interest portion of each payment is usually larger. As the balance falls, less interest is charged and more of the payment can reduce principal.
The amortization schedule generated above lets you see this change payment by payment.
What affects your monthly loan payment?
The basic payment is mainly affected by three values:
- Loan amount: borrowing more generally increases the monthly payment and total interest.
- Interest rate: a higher rate increases the cost of borrowing.
- Loan term: a longer term can lower the monthly payment but increase total interest because the balance remains outstanding for longer.
Why a lower monthly payment can cost more overall
A longer repayment term spreads the balance across more payments. This can make each monthly payment smaller, but it can also increase the amount of interest paid over the full term.
That is why it is useful to compare the monthly payment, total repayment and total interest together instead of looking only at the monthly figure.
What this loan calculator includes
This calculator provides:
- estimated monthly payment;
- estimated total repayment;
- estimated total interest;
- payment-by-payment amortization schedule.
What this calculator does not include
Real lending products can contain additional costs or rules that are not part of a basic amortization formula.
These may include:
- initiation or arrangement fees;
- monthly service fees;
- insurance;
- taxes or government charges;
- early-repayment charges;
- variable interest-rate changes;
- other lender-specific terms.
How to compare loan scenarios
Try changing one input at a time so you can see which part of the loan has the biggest effect.
- compare a lower and higher interest rate;
- compare shorter and longer repayment terms;
- reduce the amount borrowed;
- compare both the monthly payment and total interest;
- check the calculator against the lender's official quotation.
About this calculation
CalcNator uses the standard fixed-rate amortization relationship shown on this page and handles 0% interest separately.
The results are general estimates rather than official lender quotations.
Read Methodology & Accuracy for more information about formulas, assumptions, rounding and limitations.
Learn more about loan interest
For a deeper explanation of principal, interest rates, repayment terms and amortization, read: