A loan repayment calculator is an essential tool for anyone borrowing money, whether for a mortgage, car, personal expenses, or business. It helps you estimate your monthly payments, understand the total cost of borrowing, and plan your finances effectively. The core of the calculation relies on the annuity formula, which factors in the principal loan amount, the interest rate, and the loan term.
The Math Behind the Calculation
The standard formula used to calculate the fixed monthly payment (M) for an amortizing loan is:
$$ M = P \left[ \frac{i(1+i)^n}{(1+i)^n – 1} \right] $$
Where:
P = Principal loan amount (the total amount borrowed).
i = Monthly interest rate (annual interest rate divided by 12, then divided by 100 to convert from percentage to decimal).
n = Total number of payments (loan term in years multiplied by 12).
This formula ensures that each payment covers both the interest accrued for that period and a portion of the principal. Over time, the principal portion of each payment increases, while the interest portion decreases, leading to the loan being fully paid off by the end of its term.
How to Use the Calculator
Loan Amount: Enter the total sum of money you intend to borrow.
Annual Interest Rate: Input the interest rate as a percentage per year (e.g., 5 for 5%).
Loan Term (Years): Specify how many years you plan to take to repay the loan.
After entering these details, click "Calculate Monthly Payment" to see your estimated monthly repayment. Use the "Reset" button to clear the fields and perform a new calculation.
Why This Calculator is Useful
Budgeting: Helps you determine if the monthly payment fits within your budget.
Comparison: Allows you to compare different loan offers by seeing how varying interest rates and terms affect your payments.
Financial Planning: Provides a clear picture of your long-term financial commitments.
Avoiding Debt Traps: Understanding the full cost of a loan can help prevent over-borrowing.
Remember that this calculator provides an estimate. Actual loan payments may vary slightly due to lender-specific fees, loan origination charges, or different calculation methods. Always consult with your lender for precise figures.
function calculateRepayment() {
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");
var resultHTML = "";
// Input validation
if (isNaN(loanAmount) || loanAmount <= 0) {
resultHTML = "Please enter a valid loan amount.";
} else if (isNaN(annualInterestRate) || annualInterestRate < 0) {
resultHTML = "Please enter a valid annual interest rate.";
} else if (isNaN(loanTermYears) || loanTermYears <= 0) {
resultHTML = "Please enter a valid loan term in years.";
} else {
var monthlyInterestRate = annualInterestRate / 12 / 100;
var numberOfPayments = loanTermYears * 12;
var monthlyPayment;
if (annualInterestRate === 0) {
monthlyPayment = loanAmount / numberOfPayments;
} else {
monthlyPayment = loanAmount * (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments)) / (Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1);
}
// Format the output to two decimal places
var formattedMonthlyPayment = monthlyPayment.toFixed(2);
resultHTML = "Estimated Monthly Payment: $" + formattedMonthlyPayment + "";
// Optional: Calculate and display total repayment and total interest
var totalRepayment = monthlyPayment * numberOfPayments;
var totalInterest = totalRepayment – loanAmount;
resultHTML += "Total Repayment: $" + totalRepayment.toFixed(2) + " | Total Interest: $" + totalInterest.toFixed(2) + "";
}
resultDiv.innerHTML = resultHTML;
}
function resetCalculator() {
document.getElementById("loanAmount").value = "";
document.getElementById("annualInterestRate").value = "";
document.getElementById("loanTermYears").value = "";
document.getElementById("result").innerHTML = "Your estimated monthly payment will appear here.";
}