A loan repayment calculator, often integrated with an amortization schedule, is a vital financial tool that helps borrowers understand the true cost of a loan and how their payments are structured over time. Whether you're considering a mortgage, auto loan, personal loan, or business financing, this calculator provides clarity and enables informed financial planning.
How the Calculation Works (The Amortization Formula)
The core of loan repayment calculation lies in determining the fixed monthly payment (M) required to pay off a loan over a specific term. This is achieved using the standard loan amortization formula:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
Where:
M = Your total monthly mortgage payment
P = The principal loan amount (the amount you borrow)
i = Your monthly interest rate. This is calculated by dividing your annual interest rate by 12. For example, if your annual rate is 6%, your monthly rate (i) is 0.06 / 12 = 0.005.
n = The total number of payments over the loan's lifetime. This is calculated by multiplying the number of years in your loan term by 12. For example, a 30-year loan has 30 * 12 = 360 payments.
What is Amortization?
Amortization refers to the process of paying off a debt over time through regular, scheduled payments. Each payment you make on an amortizing loan is applied to both the principal balance and the interest accrued. In the early stages of the loan, a larger portion of your payment goes towards interest. As you continue to make payments, the balance decreases, and consequently, a larger portion of each subsequent payment is applied to the principal. An amortization schedule details exactly how much of each payment goes towards interest and principal, and the remaining balance after each payment.
Key Use Cases for This Calculator:
Budgeting: Estimate your monthly loan payments to see if they fit within your budget.
Loan Comparison: Compare different loan offers by inputting varying loan amounts, interest rates, and terms to find the most affordable option.
Financial Planning: Understand the total cost of borrowing, including the total interest paid over the life of the loan.
Debt Reduction Strategy: See how extra payments could potentially shorten your loan term and save you money on interest.
By using this calculator, you gain a clearer picture of your loan obligations, empowering you to make sound financial decisions and manage your debt effectively.
function calculateLoanRepayment() {
var loanAmount = parseFloat(document.getElementById("loanAmount").value);
var annualInterestRate = parseFloat(document.getElementById("annualInterestRate").value);
var loanTermYears = parseFloat(document.getElementById("loanTermYears").value);
var resultDiv = document.getElementById("result");
resultDiv.innerHTML = ""; // Clear previous results
// Input validation
if (isNaN(loanAmount) || loanAmount <= 0) {
resultDiv.innerHTML = "Please enter a valid loan amount greater than zero.";
return;
}
if (isNaN(annualInterestRate) || annualInterestRate < 0) {
resultDiv.innerHTML = "Please enter a valid annual interest rate (0% or greater).";
return;
}
if (isNaN(loanTermYears) || loanTermYears 0) {
monthlyPayment = loanAmount * (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments)) / (Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1);
} else {
// Handle zero interest rate case
monthlyPayment = loanAmount / numberOfPayments;
}
totalPayment = monthlyPayment * numberOfPayments;
totalInterestPaid = totalPayment – loanAmount;
// Format results for display
var formattedMonthlyPayment = monthlyPayment.toFixed(2);
var formattedTotalPayment = totalPayment.toFixed(2);
var formattedTotalInterest = totalInterestPaid.toFixed(2);
resultDiv.innerHTML = "Your estimated monthly payment is: " +
"$" + formattedMonthlyPayment + "" +
"Total amount paid over the loan term: $" + formattedTotalPayment + "" +
"Total interest paid: $" + formattedTotalInterest;
}