When you take out a loan, the Total Loan Cost represents the entire amount you will repay over the life of the loan. This includes the original principal amount borrowed plus all the interest you pay. Understanding this figure is crucial for financial planning, as it helps you grasp the true cost of borrowing money and compare different loan offers effectively.
This calculator helps you determine this total cost by taking into account the loan amount, the annual interest rate, and the loan term.
How it Works (The Math)
The calculation involves several steps:
Monthly Interest Rate Calculation: The annual interest rate is first converted into a monthly rate by dividing it by 12.
Monthly Rate = Annual Interest Rate / 12
Monthly Payment Calculation: The standard formula for calculating the monthly payment (M) on an amortizing loan is used:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1] Where:
P = Principal loan amount
i = Monthly interest rate (from step 1)
n = Total number of payments (loan term in months)
Total Repayment Calculation: The total amount repaid is simply the monthly payment multiplied by the total number of payments.
Total Repayment = Monthly Payment * Loan Term (in Months)
Total Interest Paid: The total interest paid is the difference between the total repayment and the original principal loan amount.
Total Interest Paid = Total Repayment - Principal Loan Amount
Total Loan Cost: This is the sum of the principal loan amount and the total interest paid. (Or simply, the Total Repayment calculated in step 3).
Total Loan Cost = Total Repayment
Why This Matters
Knowing the total loan cost allows you to:
Budget Effectively: Understand the full financial commitment before taking on debt.
Compare Loans: Accurately compare offers from different lenders, even if they have varying terms or fee structures. A lower advertised interest rate doesn't always mean a lower total cost.
Avoid Surprises: Prevent unexpected costs by factoring in the total interest paid.
Financial Planning: Make informed decisions about whether a loan is the right financial tool for your situation.
Use this calculator to gain clarity on the true cost of your loan and make more confident financial choices.
function calculateTotalLoanCost() {
var loanAmount = parseFloat(document.getElementById("loanAmount").value);
var interestRate = parseFloat(document.getElementById("interestRate").value);
var loanTermMonths = parseInt(document.getElementById("loanTermMonths").value);
var resultDiv = document.getElementById("result");
var resultValueSpan = document.getElementById("result-value");
// Clear previous results and styling
resultDiv.style.display = "none";
resultValueSpan.textContent = "$0.00";
// Input validation
if (isNaN(loanAmount) || loanAmount <= 0) {
alert("Please enter a valid loan amount.");
return;
}
if (isNaN(interestRate) || interestRate < 0) {
alert("Please enter a valid annual interest rate.");
return;
}
if (isNaN(loanTermMonths) || loanTermMonths <= 0) {
alert("Please enter a valid loan term in months.");
return;
}
var monthlyInterestRate = interestRate / 100 / 12;
var numberOfPayments = loanTermMonths;
var principal = loanAmount;
var monthlyPayment;
// Handle the case where interest rate is 0
if (monthlyInterestRate === 0) {
monthlyPayment = principal / numberOfPayments;
} else {
// Standard amortization formula
var numerator = monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments);
var denominator = Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1;
monthlyPayment = principal * (numerator / denominator);
}
var totalRepayment = monthlyPayment * numberOfPayments;
var totalLoanCost = totalRepayment; // Total Loan Cost is the total amount repaid
// Format and display the result
resultValueSpan.textContent = "$" + totalLoanCost.toFixed(2);
resultDiv.style.display = "block";
}