What This Calculator Solves For
Every fixed-rate loan is built from four numbers: the amount borrowed, the interest rate, the length of the term, and the payment made each month. Fix any three and the fourth is decided for you. That is the whole idea behind the two tabs above, and it maps onto the two questions borrowers actually arrive with.
The Fixed Term tab answers what will this cost me every month? You already know how long you want the loan to run — five years on a car, fifteen on a mortgage — and you need the payment that retires the balance in exactly that time. The Fixed Payments tab answers the reverse question: I can afford this much a month, so when will I be free of it? Here the term is the unknown, and the answer usually lands somewhere awkward like four years and eight months rather than a round number.
Neither question is more advanced than the other. They are the same equation rearranged, and which one you need depends entirely on whether your constraint is the calendar or your budget.
The Formula Behind Both Tabs
The monthly payment on an amortized loan comes from the standard annuity formula. With P as the amount borrowed, r as the monthly interest rate (the annual rate divided by twelve), and n as the total number of monthly payments:
Take a $28,500 loan at 7.4% over five years. The monthly rate is 0.074 ÷ 12, or about 0.006167, and there are 60 payments. Running those through the formula gives a payment of $569.73. Multiply by 60 and the total repaid is $34,183.69, of which $5,683.69 is interest.
The Fixed Payments tab solves the same relationship for n instead, using logarithms:
Keeping the same loan but paying $600 a month rather than $569.73 gives n = 56.38 payments — four years and roughly eight and a half months, with $5,327.78 of interest. An extra $30 a month, which is not a dramatic sacrifice, removes almost four months from the term and about $356 from the interest bill. That kind of asymmetry is easy to miss until you can see both numbers side by side.
One term in that second formula deserves attention. If M is smaller than P × r — the interest charged in a single month — the expression inside the logarithm turns negative and there is no solution. That is not a quirk of the arithmetic; it is the arithmetic telling you the loan never gets paid off. The calculator catches this case and shows you the monthly interest charge instead of a fictional payoff date.
Each Input, and Where People Go Wrong
- Loan amount. This is the sum actually advanced to you, not the price of what you are buying. On a car, subtract your down payment and any trade-in value first; on a mortgage, subtract the deposit. If the lender rolls origination fees into the balance rather than charging them upfront, include those too, because you pay interest on them.
- Loan term. Enter it in years — five, seven, thirty. A longer term is not free money. It lowers the monthly figure by spreading the same debt across more months, while quietly increasing what you hand over in total.
- Monthly payment. Only used by the Fixed Payments tab. Enter what you can genuinely sustain every month, including the months when something else goes wrong, rather than the best month you have had.
- Interest rate. The annual rate as your lender quotes it, entered as a plain percentage. If you have an APR on the offer document and you want the comparison to include fees, use that figure instead.
The most common mistake is entering an already-monthly rate in the interest field. Almost every US lender quotes annually, and the calculator divides by twelve internally — so entering a monthly rate inflates the true cost twelvefold. If your result looks wildly wrong, that is the first thing to check.
Fixed Term or Fixed Payment: Which Question Are You Asking?
The tabs suit different moments in a decision. Early on, when you are still deciding whether something is affordable at all, the Fixed Payments view is more useful: you know what your budget will bear, and you want to know what that buys you in time. Later, once you are comparing concrete offers, the Fixed Term view lets you hold the term constant and see purely how the rate moves the payment.
They are also useful together. Run Fixed Term to find the scheduled payment, then run Fixed Payments with a slightly higher figure to see what overpaying would buy. On our $28,500 example, the difference between the required $569.73 and a voluntary $600 is worth almost four months of freedom. Round the payment up to $700 and the loan clears in under four years.
One caution on overpaying: confirm with your lender that extra money reduces the principal rather than sitting as a credit toward next month's bill. The two are not the same, and only the first shortens the loan.
Reading the Amortization Schedule
The schedule below the calculator shows where each payment actually goes. Switch between the annual view for the shape of the loan and the monthly view for individual payments.
The pattern is the same on every amortized loan: early payments are mostly interest, late payments are mostly principal. Interest is charged on whatever you still owe, so when the balance is at its largest the interest portion is too. On the $28,500 example, the first year retires $4,891 of principal while $1,945 disappears into interest. By the final year almost the entire payment is principal.
This is why the timing of extra payments matters so much. A hundred dollars put against the balance in month three removes interest that would otherwise have accrued for the rest of the term. The same hundred dollars in the second-to-last month saves you almost nothing, because there is barely any term left for interest to accumulate over.
The chart beside the schedule plots three things at once: the falling balance, the cumulative interest you have handed over, and the cumulative total paid. Where the interest line flattens is the point at which the loan stops being expensive to hold.
Why the Final Payment Is Rarely a Round Number
In the Fixed Payments tab, results arrive as something like "4 years 8.38 months". That fraction is real, not a rounding artifact. A fixed payment almost never divides a balance evenly, so after the second-to-last payment a small remainder is left. The closing payment is only that remainder plus one month of interest on it.
On the $28,500 example at $600 a month, 56 full payments are made and the 57th is just $227.78. Lenders handle this in different ways — some collect the smaller amount, others fold it into the previous payment — but the total cost is effectively identical either way, and the schedule always ends at exactly zero.
What This Calculator Does Not Cover
The figure produced here is principal and interest only. Several real costs sit outside it, and being clear about them is more useful than pretending a single number covers everything:
- Escrow items on a mortgage. Property tax, homeowners insurance and mortgage insurance are collected alongside the loan payment and can add several hundred dollars a month. Our mortgage calculator handles those.
- Variable rates. Everything here assumes the rate is fixed for the whole term. An adjustable-rate loan will diverge as soon as it resets.
- Upfront fees. Origination charges, documentation fees and points paid separately at closing do not appear unless you add them to the loan amount. The APR calculator exists for exactly this comparison.
- Irregular payment schedules. Biweekly plans, interest-only introductory periods, seasonal payments and deferrals all follow different arithmetic.
- Late fees and penalties. The schedule assumes every payment arrives on time.
Frequently Asked Questions
How do I calculate the monthly payment on a loan?
Multiply the loan amount by the monthly interest rate, then divide by one minus (1 plus the monthly rate) raised to the negative number of payments. The monthly rate is the annual rate divided by 12, and the number of payments is the term in years times 12. The Fixed Term tab does this for you: enter the amount, the term and the rate, and the payment appears immediately along with the full schedule.
How long will it take to pay off my loan at a fixed monthly payment?
Switch to the Fixed Payments tab and enter the balance, the amount you can pay each month, and the rate. The calculator solves for the number of payments rather than the payment itself, and reports the answer in years and months. The result usually lands on a fraction of a month, because the last payment is smaller than the rest.
Why is my last payment smaller than all the others?
A fixed payment rarely divides the balance evenly. After the second-to-last payment there is a small amount left over, so the final payment is only that remainder plus one month of interest on it. In the schedule you will see the closing row is lighter than every row above it, and the ending balance lands exactly on zero.
Does a lower monthly payment mean a cheaper loan?
No, and this is the trap the two tabs are designed to expose. Stretching the same balance over a longer term lowers the monthly figure but leaves the lender's money outstanding for longer, so total interest rises. Compare the total interest line, not the monthly payment, when you are deciding between two offers.
Should I enter the interest rate or the APR?
Use the interest rate if you want the payment on the borrowed amount alone. Use the APR if you want a figure that also reflects lender fees rolled into the cost of the loan, which is the better basis for comparing two offers from different lenders. The APR is normally the higher of the two.
Does this calculator work for a car loan, personal loan or student loan?
Yes. Any loan repaid in equal monthly installments at a fixed rate uses the same arithmetic, whatever the lender calls the product. Auto loans, personal loans, fixed-rate student loans and the principal-and-interest part of a mortgage all behave identically here. What differs between them is the typical rate and term, not the formula.
What happens if my monthly payment is too small to cover the interest?
The balance grows instead of shrinking and the loan never clears, so the calculator stops and tells you the monthly interest charge instead of returning a payoff date. This is what makes minimum payments on a high-rate revolving balance so costly. Raise the payment above the monthly interest figure and a real payoff time appears.
Are taxes, insurance and fees included in the payment?
No. The figure here is principal and interest only. A mortgage payment also carries property tax, homeowners insurance and often mortgage insurance, which together can add a substantial amount each month, and some loans add origination or servicing fees. Treat the result as the loan repayment component, not the whole bill.
Disclaimer. This calculator produces estimates for general information only and is not financial, tax or legal advice. Your lender sets the actual rate, fees and payment schedule, and their figures may differ slightly because of rounding conventions or day-count methods. Confirm anything you plan to act on against your loan agreement. Learn more about CalculatorBoss and our privacy policy.