A personal loan calculator is a valuable tool for anyone considering borrowing money for various personal expenses. It helps you estimate your monthly repayment amount, the total interest you'll pay over the life of the loan, and the total cost of borrowing. By inputting the loan amount, annual interest rate, and the loan term (in months), you can quickly get an idea of what your financial commitment will look like.
How the Calculation Works (The Math Behind It)
The most common formula used to calculate the monthly payment (M) for an amortizing loan is the following:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
Where:
P = Principal loan amount (the total amount borrowed)
i = Monthly interest rate (annual interest rate divided by 12)
n = Total number of payments (loan term in months)
For example, if you borrow $10,000 (P) at an annual interest rate of 7.5% (0.075), your monthly interest rate (i) would be 0.075 / 12 = 0.00625. If you choose a loan term of 36 months (n), the formula helps determine your fixed monthly payment.
The calculator also computes the total amount paid by multiplying the monthly payment (M) by the total number of payments (n). The total interest paid is then calculated by subtracting the principal loan amount (P) from the total amount paid.
Why Use a Personal Loan Calculator?
Budgeting: Understand how a loan payment will fit into your monthly budget.
Comparison: Compare offers from different lenders by inputting their proposed terms to see the real cost.
Financial Planning: Make informed decisions about whether a loan is the right financial choice for your needs.
Debt Management: Get a clear picture of your potential debt obligations.
Using this calculator can empower you to make more confident financial decisions. Always remember that the figures provided are estimates and actual loan terms may vary based on your creditworthiness and the specific lender's policies.
function calculateLoan() {
var loanAmount = parseFloat(document.getElementById("loanAmount").value);
var annualInterestRate = parseFloat(document.getElementById("interestRate").value);
var loanTerm = parseInt(document.getElementById("loanTerm").value);
var resultDiv = document.getElementById("result");
var figureDiv = resultDiv.querySelector(".figure");
var totalPaidSpan = document.getElementById("totalPaid");
var totalInterestSpan = document.getElementById("totalInterest");
// Clear previous results
resultDiv.style.display = 'none';
figureDiv.textContent = ";
totalPaidSpan.textContent = ";
totalInterestSpan.textContent = ";
// Validate inputs
if (isNaN(loanAmount) || isNaN(annualInterestRate) || isNaN(loanTerm) ||
loanAmount <= 0 || annualInterestRate < 0 || loanTerm <= 0) {
alert("Please enter valid positive numbers for all fields.");
return;
}
// Calculate monthly interest rate
var monthlyInterestRate = annualInterestRate / 100 / 12;
var monthlyPayment = 0;
if (monthlyInterestRate === 0) {
// Simple division if interest rate is 0
monthlyPayment = loanAmount / loanTerm;
} else {
// Amortization formula
var numerator = monthlyInterestRate * Math.pow(1 + monthlyInterestRate, loanTerm);
var denominator = Math.pow(1 + monthlyInterestRate, loanTerm) – 1;
monthlyPayment = loanAmount * (numerator / denominator);
}
// Format the monthly payment and total amounts
var formattedMonthlyPayment = monthlyPayment.toFixed(2);
var totalAmountPaid = (monthlyPayment * loanTerm).toFixed(2);
var totalInterestPaid = (parseFloat(totalAmountPaid) – loanAmount).toFixed(2);
// Display results
figureDiv.textContent = '$' + formattedMonthlyPayment;
totalPaidSpan.textContent = '$' + totalAmountPaid;
totalInterestSpan.textContent = '$' + totalInterestPaid;
resultDiv.style.display = 'block';
}