A loan repayment calculator is a crucial tool for understanding the cost of borrowing money. Whether you're considering a mortgage, a car loan, a personal loan, or even student loans, knowing your monthly payment and the total interest paid is vital for financial planning. This calculator helps demystify these figures.
How Does it Work? The Math Behind the Calculation
The calculation for a standard amortizing loan (where each payment includes both principal and interest) uses a formula to determine the fixed monthly payment. The most common formula is derived from the present value of an annuity:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
Where:
M = Your total monthly mortgage payment (principal and interest)
P = The principal loan amount (the amount you borrow)
i = Your monthly interest rate. This is your annual interest rate divided by 12. For example, if your annual rate is 5%, your monthly rate is 0.05 / 12 = 0.00416667.
n = The total number of payments over the loan's lifetime. This is the loan term in years multiplied by 12. For a 5-year loan, n = 5 * 12 = 60.
Key Components Explained
Loan Amount (Principal): This is the initial sum of money you borrow from the lender.
Annual Interest Rate: This is the yearly percentage charged by the lender for the loan. It's crucial to convert this to a monthly rate for the calculation.
Loan Term: This is the duration over which you agree to repay the loan, typically expressed in years. A longer term usually means lower monthly payments but more interest paid overall.
Monthly Payment: This is the fixed amount you'll pay each month towards the loan, covering both interest accrued and a portion of the principal.
Total Interest Paid: Calculated as (Monthly Payment * Total Number of Payments) – Loan Amount. This shows the total cost of borrowing over the life of the loan.
Total Repayment: This is the sum of the Loan Amount and the Total Interest Paid.
Why Use a Loan Repayment Calculator?
This calculator is invaluable for:
Budgeting: Understand how much you can afford for monthly loan payments.
Comparison: Compare different loan offers with varying interest rates and terms.
Financial Planning: Estimate the total cost of a loan and plan your finances accordingly.
Informed Decisions: Make more informed choices when taking on debt for significant purchases like homes or cars.
By inputting the loan amount, annual interest rate, and loan term, you can quickly get an estimate of your monthly payments and the total interest you'll pay, empowering you to manage your finances more effectively.
function calculateRepayment() {
var principal = parseFloat(document.getElementById("principal").value);
var annualInterestRate = parseFloat(document.getElementById("annualInterestRate").value);
var loanTermYears = parseFloat(document.getElementById("loanTermYears").value);
var monthlyPaymentResultElement = document.getElementById("monthlyPaymentResult");
var totalInterestResultElement = document.getElementById("totalInterestResult");
var totalRepaymentResultElement = document.getElementById("totalRepaymentResult");
// Clear previous results
monthlyPaymentResultElement.innerHTML = "$0.00";
totalInterestResultElement.innerHTML = "";
totalRepaymentResultElement.innerHTML = "";
// Input validation
if (isNaN(principal) || principal <= 0) {
alert("Please enter a valid loan amount.");
return;
}
if (isNaN(annualInterestRate) || annualInterestRate < 0) {
alert("Please enter a valid annual interest rate.");
return;
}
if (isNaN(loanTermYears) || loanTermYears <= 0) {
alert("Please enter a valid loan term in years.");
return;
}
var monthlyInterestRate = annualInterestRate / 100 / 12;
var numberOfPayments = loanTermYears * 12;
var monthlyPayment;
if (monthlyInterestRate === 0) {
// Handle zero interest rate case
monthlyPayment = principal / numberOfPayments;
} else {
// Standard amortization formula
monthlyPayment = principal * (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments)) / (Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1);
}
var totalRepayment = monthlyPayment * numberOfPayments;
var totalInterest = totalRepayment – principal;
monthlyPaymentResultElement.innerHTML = "$" + monthlyPayment.toFixed(2);
totalInterestResultElement.innerHTML = "Total Interest Paid: $" + totalInterest.toFixed(2);
totalRepaymentResultElement.innerHTML = "Total Amount to Repay: $" + totalRepayment.toFixed(2);
}