Money Loan Calculator
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Reviewed by Calculator Editorial Team
Calculate loan payments, interest, and amortization schedules with our money loan calculator. Understand loan terms and repayment options.
How to Use This Calculator
Enter the loan amount, interest rate, and loan term to calculate your monthly payments. The calculator shows the total interest paid and the amortization schedule.
Key Terms
Principal: The initial amount borrowed.
Interest Rate: The annual percentage charged for borrowing.
Loan Term: The length of time to repay the loan.
Loan Payment Formula
The monthly payment (PMT) for a loan is calculated using the formula:
Monthly Payment Formula
PMT = P × [r(1 + r)n] / [(1 + r)n - 1]
Where:
- P = Principal loan amount
- r = Monthly interest rate (annual rate ÷ 12 ÷ 100)
- n = Number of payments (loan term in years × 12)
The formula accounts for the time value of money, where each payment includes both principal and interest.
Worked Example
Let's calculate a $20,000 loan at 5% annual interest for 5 years:
| Input | Value |
|---|---|
| Loan Amount | $20,000 |
| Annual Interest Rate | 5% |
| Loan Term | 5 years |
The monthly payment would be approximately $389.85, with a total interest of $1,597.20.
Types of Interest
Loans can have different interest calculation methods:
- Simple Interest: Calculated only on the original principal.
- Compound Interest: Calculated on the principal and accumulated interest.
This calculator uses compound interest, which is standard for most loans.
Common Loan Types
Different loan types have different repayment structures:
| Loan Type | Description |
|---|---|
| Fixed-Rate Loan | Interest rate remains the same throughout the loan term. |
| Variable-Rate Loan | Interest rate can change based on market conditions. |
| Adjustable-Rate Mortgage (ARM) | Interest rate adjusts periodically after an initial fixed period. |
FAQ
How is loan interest calculated?
Loan interest is typically calculated using compound interest, where each payment includes both principal and interest. The exact calculation depends on the loan type and terms.
What is the difference between APR and interest rate?
APR (Annual Percentage Rate) includes all fees and costs associated with borrowing, while the interest rate is the actual percentage charged on the loan. APR is usually higher than the interest rate.
How can I lower my loan payments?
You can lower payments by increasing the loan term, paying extra principal, or refinancing to a lower interest rate. However, these options may affect your total interest paid.