This calculator uses the standard amortization formula to compute your fixed monthly payment for a loan given its principal, annual interest rate, and repayment term in years. Amortization means each monthly payment covers both interest accrued that month and a portion of the principal.
Formula Used
M = P × [r(1 + r)ⁿ] ÷ [(1 + r)ⁿ − 1]
M
— fixed monthly payment amount
P
— loan principal (the amount borrowed)
r
— monthly interest rate = annual rate ÷ 12 ÷ 100
n
— total number of monthly payments = years × 12
Example Calculation
Suppose you borrow $20,000 at an annual interest rate of 6% over 5 years (60 months). The monthly rate r = 6 ÷ 12 ÷ 100 = 0.005. Applying the formula: M = 20,000 × [0.005 × (1.005)⁶⁰] ÷ [(1.005)⁶⁰ − 1] ≈ $386.66 per month. Total paid over 5 years = $386.66 × 60 = $23,199.60, with $3,199.60 paid in interest.
Frequently Asked Questions
The interest rate is the cost of borrowing the principal only, expressed as an annual percentage. APR includes the interest rate plus any additional fees charged by the lender, making it a more complete measure of the total yearly cost.
Yes — any extra payment beyond the scheduled monthly amount goes directly toward reducing the principal balance, which compounds over the life of the loan and can save significant money.
A shorter term increases the monthly payment but dramatically reduces the total interest paid. The trade-off is higher monthly cash flow pressure in exchange for a lower total cost of borrowing.
Yes — the underlying formula is identical. Enter the mortgage amount, interest rate, and term. Note that mortgages may also include property tax, insurance, and PMI on top of the principal and interest payment calculated here.
Personal loan rates typically range from 6% to 36% annually, depending on your credit score and the lender. Borrowers with excellent credit (750+) often qualify for rates under 12%.