How this calculator works
A fully amortizing fixed-rate loan is repaid through regular payments that cover interest and gradually reduce the borrowed principal. Enter the amount borrowed, the nominal annual interest rate and a term in whole months to estimate an equal monthly principal-and-interest payment.
The schedule shows why the payment is not simply the loan divided by the number of months. Each month's interest is based on the remaining balance. Early on, more of the payment goes to interest; as the balance falls, more goes to principal. At 0% interest, the calculation becomes a straight division. Terms from 1 to 1,200 months are supported. Calculations retain full precision and display cents, so lender schedules with per-payment rounding can differ slightly.
Worked example: $10,000 at 6% over 36 months
- Divide 6% by 12 to get a monthly rate of 0.5%, or 0.005.
- Apply the fixed-payment formula for 36 monthly payments: approximately $304.22 each month.
- In month one, interest is $10,000 × 0.005 = $50. About $254.22 goes to principal.
- Over the term, estimated interest totals $951.90.
The estimated monthly payment is $304.22, with $10,951.90 repaid in total.
First three payments in the example loan
| Month | Principal | Interest | Balance |
|---|---|---|---|
| 1 | $254.22 | $50.00 | $9,745.78 |
| 2 | $255.49 | $48.73 | $9,490.29 |
| 3 | $256.77 | $47.45 | $9,233.52 |
Interest rate is not always APR
Use the contractual interest rate for this simplified monthly calculation. An APR can include certain fees, while your actual payment may include other charges. Variable rates, daily-interest loans, extra payments and balloon payments do not follow this model.
Questions people ask
- What if the interest rate is zero?
- The payment is the amount borrowed divided by the number of monthly payments, with zero interest. For example, $1,200 over 12 months is $100 per month.
- Does this show the full cost of a mortgage?
- No. It estimates principal and interest only. Property taxes, insurance, mortgage insurance, escrow items and fees are not included.
- Can I use years instead of months?
- Convert years to months first: 3 years is 36 months and 30 years is 360 months. This calculator requires a whole number of monthly payments.