Loan Payment Calculator

How to use this calculator

The Loan Payment Calculator tells you exactly what your monthly payment will be given a loan amount, interest rate, and term. It’s useful whether you’re shopping for a loan, comparing lenders, or trying to understand what you can afford.

Standard tab covers fully amortizing loans, the kind where every monthly payment is equal and the loan is completely paid off at the end. Enter the Loan Amount, Annual Interest Rate, and Loan Term in Years. The result includes your monthly payment, total interest paid, and a full amortization breakdown.

Extra Payment tab works the same way but adds a field for additional monthly principal payments. Enter a fixed extra amount and see how it changes your payoff date and total interest. A small extra payment early in a loan has an outsized effect because it eliminates interest that would have compounded for years.

Balloon Payment tab is for loans structured with smaller regular payments and a large final payment. Enter the balloon amount and when it’s due. These appear in some commercial real estate loans and certain car financing offers. Know what you’re getting into before signing one.

What drives your monthly payment

Your monthly payment is determined by three things: how much you borrow, the interest rate, and how long you take to pay it back. All three interact, and changing any one of them shifts the others.

The monthly payment formula doesn't care whether the loan is a mortgage, a car loan, or a personal loan. The same math applies everywhere. Understanding it gives you leverage in any borrowing decision.

Loan amount and payment have a direct linear relationship: double the loan amount and you double the payment (all else equal). Rate has a nonlinear effect: doubling the rate more than doubles the interest cost over the life of the loan. Term is the most nuanced variable. Longer terms lower monthly payments but dramatically increase total interest.

These relationships mean you often face a genuine trade-off: lower monthly payment now vs. more money spent over time. Neither choice is automatically wrong. Someone with tight cash flow might rationally prefer the longer term even at higher total cost. Someone with stable income who wants to minimize interest should take the shorter term. The calculator makes the trade-off explicit.

The amortization formula

Monthly Payment Formula:

M = P x [r(1+r)^n] / [(1+r)^n - 1]

Where:

• M = monthly payment
• P = principal (loan amount)
• r = monthly interest rate = annual rate / 12
• n = total number of payments (years x 12)

For a $100,000 loan at 6% for 15 years:

• r = 0.06/12 = 0.005
• n = 15 x 12 = 180
• M = 100,000 x [0.005 x (1.005)^180] / [(1.005)^180 - 1]
• M = 100,000 x [0.005 x 2.454] / [2.454 - 1]
• M = 100,000 x 0.01227 / 1.454 = $843.86

Each payment of $843.86 covers the interest accrued since the last payment (principal balance x monthly rate) plus some principal reduction. In month 1: interest = $100,000 x 0.005 = $500. Principal = $843.86 - $500 = $343.86.

By month 180, almost the entire payment goes to principal because the balance is nearly zero.

Monthly payment for $100,000 at various rates and terms

Rate	5 Years	10 Years	15 Years	20 Years	30 Years
4%	$1,842	$1,012	$740	$606	$477
5%	$1,887	$1,061	$791	$660	$537
6%	$1,933	$1,110	$844	$716	$600
7%	$1,980	$1,161	$899	$775	$665
8%	$2,028	$1,213	$956	$836	$734
9%	$2,076	$1,267	$1,014	$900	$805

Two patterns are obvious here. Going from 5 to 30 years at 6% drops the monthly payment from $1,933 to $600, a 69% reduction in monthly cost. But the total interest paid rises from about $15,980 to $116,000. The monthly payment shrank; the lifetime cost tripled.

Moving from 4% to 9% at a 15-year term adds $274 per month. Over 15 years, that’s an extra $49,320 in payments. This is why a 1% rate difference matters enormously on large loans over long terms.

Real examples

Common mistakes

Mistake 1: Forgetting PITI on mortgage calculations

Your mortgage payment calculator gives you P+I: principal and interest. But your actual monthly housing cost includes property taxes (T) and homeowners insurance (I), together called PITI. On a $400,000 home, property taxes might add $400-800/month and insurance another $100-200. If your down payment is under 20%, add PMI (private mortgage insurance), typically 0.5-1.5% of the loan annually. Your P+I payment might be $2,100, but your all-in housing cost could be $2,800 or more.

Mistake 2: Confusing interest-only with fully amortized loans

An interest-only loan has low monthly payments because you’re not reducing the principal at all. After the interest-only period ends (often 5-10 years), payments jump sharply because you now have to pay down the full original balance in the remaining term. Some borrowers are shocked by this. Fully amortized loans, the default for most mortgages and personal loans, include principal in every payment from the start.

Mistake 3: Not accounting for prepayment penalties

Some loans charge a fee if you pay them off early, refinance, or make extra principal payments above a certain amount. Read your loan agreement. A prepayment penalty can negate the savings from an extra payment strategy or make refinancing more expensive than it looks.

Mistake 4: Treating the quoted rate as the true cost

The interest rate in your contract is the base cost. For mortgages, the APR includes origination fees, points, and other lender charges, expressing them as an annualized rate. A loan with a 6% rate and 2 points has a higher APR than a loan at 6.3% with no points. For short holding periods, the no-points loan often costs less total. For long holding periods, the lower rate with points may win. Use APR for comparison, then verify the math with this calculator using your actual planned holding period.

Balloon payments: when they make sense and when they don’t

A balloon loan has smaller regular payments and a large lump sum due at the end of the term. The regular payments are calculated as if the loan were amortizing over a longer period, but the loan actually comes due much sooner. The “balloon” is the remaining unpaid balance that’s owed all at once at maturity.

These are common in commercial real estate, some agricultural lending, and occasionally in vehicle financing. The appeal is straightforward: because the regular payments are based on a long amortization schedule, they’re significantly lower than a fully amortizing loan with the same rate and a shorter term. That lower payment can make a deal cash-flow positive that wouldn’t work otherwise.

The borrower paid $3,623/month for 5 years ($217,380 total) and still owes $449,450. That’s the structure. It works if the borrower has a plan to pay the balloon: refinancing into a new loan when the balloon comes due, selling the property, or having cash reserves. It fails when none of those options are available.

When balloon loans make sense: You’re buying a commercial property and expect to sell or refinance within the balloon period. The lower payments make the cash flow from rental income cover the debt service during the holding period. You’re confident you’ll qualify to refinance before the balloon date.

When they blow up: Interest rates rise sharply before the balloon date and you can’t refinance at an affordable rate. The property value drops and you can’t sell for enough to cover the balloon. You didn’t plan for the refinance and discover it’s harder than expected. You genuinely don’t have $449,000 sitting around. Any of these situations can turn a seemingly manageable loan into a default. Balloon loans require a clear exit strategy before you sign. Without one, you’re borrowing against a deadline you might not be able to meet.

Bottom line

Monthly payment is the number that determines whether a loan fits your budget month to month. Total interest is the number that tells you what the loan actually costs. Both matter, and the best loan decision involves both.

Before signing any loan, run the numbers here with the exact rate and term you’re being offered. Then try adjusting the term by a year or two in each direction to see how the payment changes. Try adding $50 or $100 per month extra to see how much interest you could save with modest prepayment. These are five-minute calculations that can save years of payments and thousands of dollars.

The formula doesn’t negotiate. But the terms your lender offers often do.

Balloon payments: the mechanics and the risks

A balloon loan runs a lower regular payment for its term, then requires a large lump sum at the end. It’s common in commercial real estate, some auto financing programs, and certain interest-only mortgage products.

The appeal: lower monthly outflows during the loan term. The risk: you need to refinance or sell the asset before the balloon comes due, or have cash on hand to pay it.

Balloon loans make sense when you have a clear exit strategy: you’ll sell the property, refinance at a known future date, or the business cash flow will be materially higher by year 7. They don’t make sense as a way to afford something you can’t actually afford at full amortization rates.