This calculator helps you estimate the monthly payment for a loan based on its principal amount,
the Annual Percentage Rate (APR), and the loan term. The APR represents the total cost of borrowing,
including interest and certain fees, expressed as a yearly rate. Understanding your estimated
monthly payment is crucial for budgeting and making informed financial decisions.
How the Calculation Works (The Math Behind It)
The calculator uses the standard formula for an amortizing loan, which ensures that each payment
consists of both principal and interest. The formula is derived from the present value of an annuity:
$M = P \frac{i(1+i)^n}{(1+i)^n – 1}$
Where:
M = Your total monthly payment
P = The principal loan amount (the total amount you borrow)
i = Your calculated monthly interest rate. This is found by dividing the Annual Interest Rate (APR) by 12 (months in a year). For example, if the APR is 6%, the monthly rate is 0.06 / 12 = 0.005.
n = The total number of payments over the loan's lifetime. This is calculated by multiplying the Loan Term in Years by 12 (months in a year). For example, a 5-year loan has 5 * 12 = 60 payments.
Key Terms Explained
Loan Amount (Principal): The initial sum of money borrowed.
Annual Percentage Rate (APR): The yearly cost of borrowing money, expressed as a percentage. It includes not only the interest rate but also any additional fees associated with the loan. A lower APR generally means a cheaper loan.
Loan Term: The duration of time over which the loan must be repaid, typically expressed in years. Longer loan terms often result in lower monthly payments but may lead to higher total interest paid over time.
Monthly Payment: The fixed amount paid by the borrower to the lender each month, which covers both interest accrued and a portion of the principal.
When to Use This Calculator
This calculator is useful for estimating monthly payments for various types of loans, including:
Auto loans
Personal loans
Mortgages (though these can have additional complexities like escrow)
Student loans
By inputting the loan details, you can quickly get an idea of what your recurring payments will be,
helping you assess affordability and compare different loan offers. Remember that this is an estimate,
and actual payments may vary slightly based on the lender's specific calculation methods and timing of payments.
function calculateMonthlyPayment() {
var loanAmount = parseFloat(document.getElementById("loanAmount").value);
var annualInterestRate = parseFloat(document.getElementById("annualInterestRate").value);
var loanTermYears = parseFloat(document.getElementById("loanTermYears").value);
var resultDisplay = document.querySelector("#result span");
if (isNaN(loanAmount) || loanAmount <= 0) {
resultDisplay.textContent = "Invalid loan amount. Please enter a positive number.";
return;
}
if (isNaN(annualInterestRate) || annualInterestRate < 0) {
resultDisplay.textContent = "Invalid interest rate. Please enter a non-negative number.";
return;
}
if (isNaN(loanTermYears) || loanTermYears <= 0) {
resultDisplay.textContent = "Invalid loan term. Please enter a positive number of years.";
return;
}
var monthlyInterestRate = annualInterestRate / 100 / 12;
var numberOfPayments = loanTermYears * 12;
var monthlyPayment;
if (monthlyInterestRate === 0) {
monthlyPayment = loanAmount / numberOfPayments;
} else {
monthlyPayment = loanAmount * (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments)) / (Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1);
}
if (isNaN(monthlyPayment) || !isFinite(monthlyPayment)) {
resultDisplay.textContent = "Calculation error. Please check your inputs.";
} else {
resultDisplay.textContent = "$" + monthlyPayment.toFixed(2);
}
}