Loan Interest Calculator

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Loan Interest Calculator
Monthly Payment & Total InterestLoan Amount (Principal)
Results:
Enter values and click Calculate to see results.
function calculateLoan(){var principal=parseFloat(document.getElementById('loan_amount').value);var annualRate=parseFloat(document.getElementById('interest_rate').value);var years=parseFloat(document.getElementById('loan_term_years').value)||0;var months=parseFloat(document.getElementById('loan_term_months').value)||0;if(isNaN(principal)||isNaN(annualRate)){alert('Please enter valid numerical values for Loan Amount and Interest Rate.');return;}var totalMonths=(years*12)+months;if(totalMonths<=0){alert('Loan term must be greater than 0.');return;}var monthlyRate=(annualRate/100)/12;var payment=(principal*monthlyRate)/(1-Math.pow(1+monthlyRate,-totalMonths));var totalPaid=payment*totalMonths;var totalInterest=totalPaid-principal;var html='
';html+='

Monthly Payment: $'+payment.toFixed(2)+'

';html+='

Total Interest Paid: $'+totalInterest.toFixed(2)+'

';html+='

Total Cost of Loan: $'+totalPaid.toFixed(2)+'

';html+='

Number of Payments: '+totalMonths+'

';if(document.getElementById('show_steps').checked){html+='
';html+='Calculation Details:
';html+='Interest is calculated on the declining principal balance. Formula used: M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1 ]';html+='
';}html+='
';document.getElementById('resultContent').innerHTML=html;}

Calculator Use

The loan interest calculator is a comprehensive tool designed to help borrowers understand the long-term cost of debt. Whether you are looking at a personal loan, an auto loan, or a small business line of credit, this tool calculates your monthly obligation and the total amount of interest you will pay over the life of the loan.

By adjusting the variables, you can see how a slightly lower interest rate or a shorter loan term can save you thousands of dollars in interest charges.

Loan Amount (Principal)
This is the total amount of money you are borrowing from the lender before interest is applied.
Interest Rate (APR)
The Annual Percentage Rate (APR) represents the yearly cost of borrowing funds, expressed as a percentage.
Loan Term
The duration of the loan, usually expressed in years and months. Longer terms generally result in lower monthly payments but higher total interest costs.

How It Works

Most modern loans use an amortization schedule, where interest is calculated based on the remaining balance of the loan each month. As you pay down the principal, the amount of interest charged each month decreases. The loan interest calculator uses the standard amortization formula:

M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1 ]

  • M = Total monthly payment
  • P = Principal loan amount
  • i = Monthly interest rate (Annual Rate / 12)
  • n = Total number of months (Years * 12)

Calculation Example

Example: Suppose you take out a $15,000 car loan with an interest rate of 6% for a term of 4 years (48 months).

Step-by-step solution:

  1. Identify Variables: P = 15,000; Annual Rate = 6% (0.06); n = 48 months.
  2. Calculate Monthly Rate (i): 0.06 / 12 = 0.005.
  3. Apply Formula: M = 15000 [ 0.005(1.005)^48 ] / [ (1.005)^48 – 1 ].
  4. Solve for Payment: M = $352.28 per month.
  5. Calculate Total Interest: ($352.28 * 48) – $15,000 = $1,909.44.
  6. Result: You will pay $1,909.44 in total interest over the 4-year period.

Common Questions

Does the loan interest calculator work for credit cards?

While this calculator provides a close estimate for fixed-rate installment loans, credit cards often use a "daily balance" method which can vary slightly. However, if you plan to pay off a credit card balance in fixed installments, this calculator is highly accurate for that purpose.

How can I reduce the total interest I pay?

There are three primary ways: secure a lower interest rate, choose a shorter loan term, or make extra payments toward your principal balance. Even small monthly additions to your principal can significantly reduce the total interest over time.

What is the difference between Simple and Compound interest?

Simple interest is calculated only on the initial principal. Most consumer loans (mortgages, auto, personal) use compound interest (specifically monthly compounding), where interest is calculated on the remaining principal balance, which includes any interest that has "accrued" if the loan is not being paid down correctly.

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