How to use this calculator
- Choose what to solve for. Pick Monthly payment if you know how much you want to borrow, or Loan amount if you know how much you can pay each month.
- Enter the loan amount or the payment. The payment here is principal and interest only. Leave out insurance, taxes or other add-ons.
- Enter the interest rate. Use the APR from your loan offer. If you don’t have one yet, try a few rates to see the range.
- Set the term in years or months. Car loans are usually quoted in months (60, 72), and personal loans and mortgages in years.
- Open More options to change the start date. Your first payment is assumed to be due one month after the loan starts, and the payoff date is the month of the last payment.
The results show the payment (or loan amount), how the total you repay splits between principal and interest, a chart of the balance falling over time and a full amortization schedule you can download as a CSV.
The loan payment formula
A fixed-rate installment loan is paid off with equal monthly payments. The payment that does this is:
- M is the monthly payment
- P is the amount borrowed (the principal)
- r is the monthly interest rate: the annual rate divided by 12 (8% becomes 0.08 ÷ 12 ≈ 0.006667)
- n is the number of monthly payments (5 years = 60)
To find how much you can borrow for a given payment, the same formula is solved for P:
If the rate is 0%, there’s no interest and the payment is simply P ÷ n.
Worked example
You borrow $25,000 at 8% APR for 5 years.
- Monthly rate: 0.08 ÷ 12 = 0.006667
- Number of payments: 5 × 12 = 60
- Payment: 25,000 × 0.006667 ÷ (1 − 1.006667^−60) = $506.91
Over 60 payments you repay $30,415, of which $5,415 is interest. That’s about 21.7% of the amount you borrowed.
The first payment includes $166.67 of interest (1/12 of 8% on $25,000) and $340.24 of principal. By the last year, the interest portion is just a few dollars a month. The calculator rounds each month’s interest to the cent, the way a lender’s schedule does, and adjusts the final payment by a few cents so the balance lands exactly on zero.
Flip it around: if $500 a month is your budget, at 8% for 5 years you can borrow about $24,659.
Payments on a $25,000 loan by rate and term
Here’s how the rate and the term change the monthly payment and the total interest on the same $25,000 loan:
| Rate | 3 years | 5 years | 7 years |
|---|---|---|---|
| 6% | $760.55 ($2,380 interest) | $483.32 ($3,999) | $365.21 ($5,678) |
| 8% | $783.41 ($3,203) | $506.91 ($5,415) | $389.66 ($7,731) |
| 10% | $806.68 ($4,041) | $531.18 ($6,871) | $415.03 ($9,862) |
| 12% | $830.36 ($4,893) | $556.11 ($8,367) | $441.32 ($12,071) |
Two things stand out. First, the term affects total interest more than most people expect: at 12%, the 7-year loan costs about 2.5 times as much interest as the 3-year loan. Second, each extra percentage point of rate costs more the longer the loan runs.
How much you can borrow for $500 a month
At 8% APR, the same $500 payment supports very different loan amounts depending on the term:
| Term | Loan amount |
|---|---|
| 3 years | $15,956 |
| 4 years | $20,481 |
| 5 years | $24,659 |
| 6 years | $28,517 |
| 7 years | $32,080 |
A longer term raises what you can borrow, but every extra year adds interest. Before you take the larger number, check the total interest in the results.
Tips for a cheaper loan
- Shop the APR, not the payment. A lender can always offer a lower payment by stretching the term. Compare offers at the same term.
- Choose the shortest term you can comfortably afford. Leave room in your budget for surprises, but don’t pay for years you don’t need.
- Pay extra when you can. On an amortized loan, extra money goes straight to principal and cuts all future interest. Confirm that your lender has no prepayment penalty.
- Know your debt load. Lenders look at your debt-to-income ratio as well as your credit score, so it helps to check yours before you apply.
For a car purchase with sales tax, trade-in and fees, use the auto loan calculator. For a home loan with property tax, insurance and PMI, use the mortgage calculator. And if you’d rather see what the same monthly amount could grow to as savings, try the compound interest calculator.
Assumptions and limitations
This calculator models a standard fixed-rate, fully amortizing loan with monthly payments. Interest is charged each month at the APR divided by 12. It doesn’t model variable rates, interest-only periods, balloon payments, late fees or insurance products added to the payment. Some lenders charge interest daily, which can shift the interest by a few dollars depending on the days in each month and when your payment arrives. Your lender’s disclosure and amortization schedule are the final word.
This calculator gives estimates for general information. It isn’t financial advice or a loan offer.
Frequently asked questions
How is a monthly loan payment calculated?
Most fixed-rate loans use the standard amortization formula, which finds the one level payment that covers each month's interest and pays the balance to zero by the last month. It depends only on the amount borrowed, the monthly interest rate (the APR divided by 12) and the number of payments. A $25,000 loan at 8% for 5 years works out to $506.91 a month.
How much can I borrow with a $500 monthly payment?
It depends on the rate and the term. At 8% APR, $500 a month supports about $15,956 over 3 years, $24,659 over 5 years and $32,080 over 7 years. Switch the calculator to "Loan amount" and enter your own payment, rate and term to see your number.
Why does so much of my early payment go to interest?
Interest is charged on the balance you still owe, and the balance is highest at the start. As you pay principal down, each month's interest charge shrinks, so a growing share of the same payment goes to principal. On a $25,000, 5-year loan at 8%, the first payment is about one-third interest; the last is almost all principal.
Is a longer loan term a bad idea?
A longer term lowers the monthly payment but raises the total interest, often by a lot. Stretching a $25,000 loan at 8% from 5 years to 7 years cuts the payment by about $117 a month but adds about $2,316 in interest. If you choose the longer term for breathing room, paying extra when you can wins most of that interest back.
Does paying extra on a loan save money?
Yes, on a simple-interest amortized loan any extra payment goes to principal, which lowers every future interest charge and ends the loan sooner. Check first that your lender applies extra payments to principal and doesn't charge a prepayment penalty. Your loan agreement will say.
What's the difference between APR and interest rate?
The interest rate is what you're charged on the balance. The APR folds in certain upfront finance charges, such as origination fees, and expresses the total as a yearly rate. If your loan has no fees, the two are the same. If it has fees, use the personal loan calculator to see the true APR.
Updated November 2026. Results are estimates for educational purposes and depend on the inputs you provide.