How does loan term affect monthly payments?

A longer loan term lowers your monthly payment but increases the total interest you pay over the life of the loan. A shorter term has higher payments but less total interest.

The principal is the original sum of money borrowed in a loan, or the remainder of that sum after some payments have been made.

How does credit score affect interest rate?

Generally, a higher credit score qualifies you for lower interest rates, which reduces your monthly payment and total loan cost.

What is LTV (Loan-to-Value) ratio?

LTV is a risk assessment ratio that financial institutions use. It is calculated by dividing the loan amount by the appraised value of the asset.

What happens if I miss a payment?

Missing a payment can result in late fees, increased interest rates, and damage to your credit score. Always contact your lender if you anticipate trouble paying.

What is a secure loan?

A secured loan is backed by collateral, such as a car or house. If you default, the lender can seize the asset.

How to reduce total interest paid?

You can reduce total interest by securing a lower rate, choosing a shorter loan term, or making extra principal payments.

Refinancing involves replacing an existing loan with a new one, typically to take advantage of lower interest rates or better terms.

Can I calculate student loans here?

Yes, this calculator works for student loans. Just input your total balance, interest rate, and repayment term.

What is debt-to-income ratio (DTI)?

DTI is the percentage of your gross monthly income that goes toward paying debts. Lenders use it to determine your borrowing risk.

How to convert annual rate to monthly?

Divide the annual interest rate by 12. For example, a 6% annual rate is 0.5% per month.

Equity is the difference between the market value of your home (or asset) and the amount you owe on your mortgage.

Can I use this for credit card payoff?

Yes. Enter your total credit card balance as the loan amount and your card's APR to see how long it will take to pay off with fixed payments.

Loan Calculator

Q: What is amortization?

Amortization is the process of paying off a debt over time through regular payments. An amortization schedule shows how much of each payment goes toward principal vs. interest.

Q: How do extra payments help?

Making extra payments goes directly toward the principal balance, reducing the interest charged in future months and shortening the loan term.

Q: What is a down payment?

A down payment is an upfront partial payment for the purchase of expensive items like a car or house. A larger down payment reduces the loan amount and monthly payments.

Q: What is a fixed-rate loan?

A fixed-rate loan has an interest rate that remains the same for the entire term of the loan, ensuring consistent monthly payments.

Q: What is a variable-rate loan?

A variable-rate loan has an interest rate that can change over time based on market conditions, potentially increasing or decreasing your monthly payment.

Estimate monthly payments for mortgages, auto, and personal loans.

Loan Details

Loan Amount ($)

Interest Rate (%)

Term (Years)

Monthly Payment

Principal

Interest

Total Interest

Total Cost

Complete Guide to Loan Calculations

Understanding the Basics

When you take out a loan, you aren't just paying back the money you borrowed. You are paying for the privilege of using that money, which is called interest.

Most mortgages and auto loans use an amortization schedule. This means your monthly payment stays the same, but the split between principal (the loan balance) and interest changes every month.

In the early years of a long-term loan, the vast majority of your payment goes toward interest, not paying down your debt.

Key Terms Explained

Principal: The amount of money you borrowed.
Term: How long you have to pay it back (e.g., 30 years).
Interest Rate: The cost of borrowing expressed as a percentage.
APR: Annual Percentage Rate. This includes the interest rate PLUS fees, giving you a truer picture of the loan's cost.

The Loan Formula

Calculating a fixed monthly payment requires a specific formula that accounts for compound interest.

M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]

How to Pay Off Your Loan Faster

Because interest is calculated based on your outstanding balance, reducing that balance quickly saves you exponential amounts of money.

Bi-weekly Payments: Instead of paying monthly, pay half that amount every two weeks. You'll end up making 13 full payments a year instead of 12.
Round Up: If your payment is $245, pay $300. That extra $55 goes straight to principal.
Refinance: If interest rates drop, refinancing to a lower rate or a shorter term (e.g., 30 years to 15 years) can save tens of thousands of dollars.

Common Loan Questions

Answers to frequently asked questions about mortgages and loans.

How is a monthly loan payment calculated?

The formula is M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1], where P is principal, i is monthly interest rate, and n is number of payments.

What is the difference between APR and Interest Rate?

The interest rate is the cost of borrowing money. APR includes the interest rate plus other fees like origination charges, reflecting the true cost of the loan.

How does loan term affect payments?

A longer term lowers monthly payments but increases total interest. A shorter term has higher payments but less total interest.

What is amortization?

Amortization is paying off debt over time through regular payments. A schedule shows the principal vs. interest split.

How do extra payments help?

Extra payments go toward the principal, reducing future interest charges and shortening the loan term.

What is a down payment?

An upfront partial payment for a purchase. Larger down payments reduce the loan amount and monthly payments.

Can I use this for a car loan?

Yes, this calculator works for auto loans, personal loans, and mortgages. Just enter the correct rate and term.

What is principal?

The principal is the original sum borrowed, or the remainder of that sum after payments are made.

What is a fixed-rate loan?

A loan where the interest rate stays the same for the entire term, ensuring consistent monthly payments.

What is a variable-rate loan?

A loan where the interest rate can change over time based on market conditions, altering your payment amount.

How does credit score affect rate?

Higher credit scores generally qualify for lower interest rates, reducing the total cost of the loan.

Is this calculator accurate?

It provides a close estimate based on standard math. Actual terms may vary due to lender-specific fees.

What is LTV ratio?

Loan-to-Value ratio calculates risk by dividing the loan amount by the appraised value of the asset.

Does this calculate PMI?

This tool calculates principal and interest. PMI is an extra cost if your down payment is under 20%.

What if I miss a payment?

Missing payments causes late fees, credit damage, and potential default. Contact lenders early if you have trouble.

What is a balloon payment?

A large lump sum payment due at the end of a loan term, common in some mortgages and auto loans.

How much house can I afford?

Generally, your monthly housing payment should not exceed 28% of your gross monthly income.

What is compound interest?

Interest calculated on the principal plus accumulated interest. Most loans use simple interest amortization.

What is simple interest?

Interest calculated only on the principal amount. Most car loans and mortgages use simple interest calculations.

What is a secured loan?

A loan backed by collateral (like a car or house). If you default, the lender can seize the asset.

What is an unsecured loan?

A loan not backed by collateral (e.g., credit cards). They typically have higher interest rates.

Does this tool save my data?

No. N28 is privacy-first. All calculations happen in your browser; no financial data is sent to servers.

What is the total cost of a loan?

The sum of the principal amount plus the total interest paid over the life of the loan.

How to reduce total interest?

Secure a lower rate, choose a shorter term, or make extra principal payments to reduce total cost.

What is refinancing?

Replacing an existing loan with a new one, typically to get a lower interest rate or better terms.

What is a grace period?

A set time after the due date during which payment can be made without penalty.

What is a pre-payment penalty?

A fee charged by some lenders if you pay off your loan early. Check your agreement.

Can I calculate student loans?

Yes. Input your total balance, interest rate, and term to estimate student loan payments.

What is an origination fee?

An upfront fee charged by a lender for processing a new loan application.

How is daily interest calculated?

Divide the annual interest rate by 365 and multiply by the outstanding principal balance.

What is a bi-weekly payment?

Paying every two weeks results in one extra full payment per year, reducing principal faster.

Is a longer loan term better?

Longer terms have lower monthly payments but cost more in total interest. Shorter terms save money.

What is debt-to-income ratio?

The percentage of your gross income that goes toward debts. Lenders use it to assess risk.

What is a soft credit check?

An inquiry into your credit history that does not affect your score, often used for pre-approval.

What is a hard credit check?

A check by a lender for a loan application. It may temporarily lower your credit score.

What is the prime rate?

The benchmark interest rate commercial banks charge their most creditworthy customers.

Convert annual rate to monthly?

Divide the annual rate by 12. E.g., 6% annual is 0.5% per month.

What is negative amortization?

When payments don't cover interest, causing the loan balance to increase instead of decrease.

What is equity?

The difference between your home's market value and the amount you owe on the mortgage.

Can I calculate credit card payoff?

Yes. Enter your card balance and APR to see payoff time with fixed payments.