A loan with interest calculator is an essential tool for anyone considering borrowing money, whether for a car, a home, education, or personal expenses. It helps demystify the total cost of borrowing by breaking down the monthly payments, the total interest paid over the life of the loan, and the overall amount you will repay.
How the Calculation Works
The most common method for calculating loan payments is the annuity formula. This formula determines a fixed periodic payment (usually monthly) that covers both the principal amount borrowed and the interest accrued over time. The formula for calculating the monthly payment (M) is:
n = Total number of payments (Loan term in years * 12)
Once the monthly payment is calculated, the total interest paid and the total repayment amount are straightforward to determine:
Total Repayment = Monthly Payment (M) * Total number of payments (n)
Total Interest Paid = Total Repayment – Principal loan amount (P)
Key Inputs Explained
Loan Amount (Principal): This is the total sum of money you are borrowing. It's the base amount on which interest is calculated.
Annual Interest Rate: This is the yearly percentage charged by the lender. It's crucial to convert this to a monthly rate (divide by 12) and a decimal (divide by 100) for the calculation.
Loan Term (Years): This is the duration over which you agree to repay the loan. It's converted into the total number of monthly payments.
Why Use This Calculator?
Budgeting: Understand how much you can afford for a monthly payment.
Comparison Shopping: Compare loan offers from different lenders. Even a small difference in interest rate or term can significantly impact the total cost.
Financial Planning: Visualize the total financial commitment of a loan before you sign any agreement.
Amortization Insight: While this calculator provides a summary, understanding these numbers is the first step to grasping how loan amortization works, where early payments are heavily weighted towards interest.
By using this calculator, you gain clarity and control over your borrowing decisions, ensuring you make informed choices that align with your financial goals.
function calculateLoan() {
var loanAmount = parseFloat(document.getElementById("loanAmount").value);
var annualInterestRate = parseFloat(document.getElementById("annualInterestRate").value);
var loanTermYears = parseFloat(document.getElementById("loanTermYears").value);
var resultSection = document.getElementById("result-section");
var loanPaymentOutput = document.getElementById("loan-payment-output");
var totalInterestOutput = document.getElementById("total-interest-output");
var totalRepaymentOutput = document.getElementById("total-repayment-output");
if (isNaN(loanAmount) || isNaN(annualInterestRate) || isNaN(loanTermYears) ||
loanAmount <= 0 || annualInterestRate < 0 || loanTermYears 0) {
monthlyPayment = loanAmount * (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments)) / (Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1);
} else {
// Simple division if interest rate is 0
monthlyPayment = loanAmount / numberOfPayments;
}
var totalRepayment = monthlyPayment * numberOfPayments;
var totalInterestPaid = totalRepayment – loanAmount;
// Format currency
var formatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
minimumFractionDigits: 2,
maximumFractionDigits: 2
});
loanPaymentOutput.textContent = formatter.format(monthlyPayment);
totalInterestOutput.textContent = formatter.format(totalInterestPaid);
totalRepaymentOutput.textContent = formatter.format(totalRepayment);
resultSection.style.display = "block";
}