Loan Calculator
Calculate monthly loan payments, total interest paid, and the full cost of any loan.
How Loan Interest and Amortisation Work
Most personal loans, mortgages, and car finance use amortising repayment, where each monthly payment covers both the interest accrued since the last payment and a portion of the original principal. The interest is calculated on the outstanding balance, which is highest at the start of the loan. In the early months, the majority of each payment goes toward interest rather than reducing what you owe.
As the outstanding balance decreases over time, less interest accrues each month, so a larger fraction of each payment goes toward principal reduction. This amortisation structure means that switching to a shorter loan term substantially reduces the total interest paid over the life of the loan, even though the monthly payment is higher.
What a Loan Calculator Helps You Decide
A loan calculator lets you model different borrowing scenarios before committing. You can compare the monthly payment for different loan terms and immediately see the trade-off between a lower monthly payment and a significantly higher total interest cost. You can also calculate the maximum loan amount you can afford given a specific monthly budget.
Loan calculators are also valuable when considering refinancing. If interest rates have fallen since you took out a loan, you can calculate whether the total interest savings from refinancing outweigh the upfront costs. For businesses calculating the cost of equipment finance or working capital loans, a loan calculator makes the true cost of borrowing transparent and comparable across different lenders and products.
How to Use Loan Calculator
- 1
Enter the loan amount (principal).
- 2
Enter the annual interest rate as a percentage.
- 3
Enter the loan term in years.
- 4
The monthly payment, total interest, and total cost are calculated instantly.
Frequently Asked Questions
How is the monthly loan payment calculated?
The monthly payment uses the standard amortisation formula: M = P × r(1+r)^n / ((1+r)^n – 1), where P is the principal, r is the monthly interest rate, and n is the number of months.
How do I calculate mortgage payments?
Enter the home loan amount as Loan Amount, your mortgage interest rate as Annual Interest Rate, and the mortgage term in years. The monthly payment, total interest, and total cost are calculated instantly.
What is the total interest on a loan?
Total interest is the total amount paid minus the original loan amount. Our loan calculator shows this breakdown so you can see the full cost of borrowing.