TidyToolsHow the loan calculator works
A fixed-rate loan is repaid in equal monthly instalments. Each payment covers the interest that built up that month, and whatever's left chips away at the balance. Early on, most of your payment is interest; later, more of it goes to the principal. This calculator uses the standard amortisation formula to find the single monthly payment that clears the loan exactly at the end of the term.
The formula is M = P · r · (1 + r)ⁿ ÷ ((1 + r)ⁿ − 1), where P is the amount borrowed, r is the monthly interest rate (the APR divided by 12), and n is the number of monthly payments. Multiply the monthly payment by the number of payments and you get the total repaid; subtract the amount you borrowed and you're left with the total interest — the real price of the loan.
A worked example
Borrow $20,000 at 7.5% APR over 5 years. That's a monthly rate of 0.625% across 60 payments, giving a monthly payment of about $401. Over the full term you repay roughly $24,046 — so the loan costs you about $4,046 in interest on top of the $20,000 you borrowed. Shortening the term raises the monthly payment but cuts the total interest; lengthening it does the opposite.
Tips before you borrow
- Compare the APR, not just the monthly payment — a low payment over a long term can hide a lot of interest.
- Check whether overpayments are allowed without penalty; paying extra early saves the most interest.
- Watch for fees (arrangement, origination) that aren't captured by the interest rate alone.
Frequently asked questions
Does this work for car loans, personal loans and mortgages?
Yes — any fixed-rate, fixed-term loan with equal monthly payments uses the same maths. For mortgages, remember that taxes and insurance are often added on top of this principal-and-interest figure.
What's the difference between interest rate and APR?
The interest rate is the cost of borrowing the principal. APR also folds in certain fees, so it's usually a truer comparison between loans. This tool treats the rate you enter as the annual rate applied monthly.
How can I pay less interest?
Choose a shorter term, secure a lower rate, or make overpayments. Even small extra payments early in the loan cut the total interest noticeably.
Is this financial advice?
No. It's a free math tool for estimates only, not financial advice. Always check the exact figures in your loan agreement.