Quick answer
A loan calculator turns an amount, a rate and a term into the monthly payment and total cost of borrowing. Borrow $25,000 at 7.5% over 5 years and the payment is $500.95 a month; you repay $30,057 in total, so the loan costs $5,057 in interest. Extending the term lowers the payment but always raises the total interest.
How the Loan Calculator works, step by step
Enter the loan amount, annual interest rate and term. The calculator solves for the fixed monthly payment that repays the loan exactly by the final month, with interest charged each month on the balance then outstanding. It also shows the payoff date and the share of your total repayment that is interest rather than principal.
Use the interest total, not the payment, to compare terms. On the example loan, stretching from 5 to 7 years drops the payment by about $117 a month but adds roughly $2,153 of interest; shortening to 3 years raises the payment to $777.66 but cuts interest to $2,996. Lenders present the payment because it looks smaller; the total cost is the figure that leaves your account.
The yearly amortisation table shows why early payments feel unproductive. In year one of the example loan, $1,730 of your $6,011 goes to interest and $4,282 to principal — and in month one alone, $156.25 of the $500.95 payment is interest. The interest share falls every month as the balance falls, which is why extra payments early in the loan save the most interest.
If fees are involved — origination fees, documentation charges — the interest rate understates the cost. Switch to the APR figure on the loan disclosure for comparisons, or use an APR calculator: fees of a few hundred dollars on a short loan can add a full point or more to the true rate. On a fee-free loan the rate and the APR coincide.
Judge the rate against the market before signing. The Federal Reserve's G.19 release put the average 24-month personal loan at commercial banks at 11.86% in May 2026, and the average credit card account assessed interest at 22.36% in the third quarter of 2026. A loan priced well above the bank average for its type is worth shopping around before you accept it.
The formula
Monthly payment = Amount × [r(1 + r)^n] ÷ [(1 + r)^n − 1], where r is the monthly rate (annual rate ÷ 12) and n the number of monthly payments. Total interest = (payment × n) − amount. Each month's interest = balance × r; the rest of the payment reduces the balance.
Worked example — try it on the calculator above
Worked example: $25,000 at 7.5% over 5 years
Payment: $25,000 × [0.00625 × (1.00625)^60] ÷ [(1.00625)^60 − 1] = $500.95. Over 60 payments you hand over $30,056.92, so interest is $5,056.92 — about 20 cents per dollar borrowed, and 16.8% of everything you pay. The same loan over 3 years costs $777.66 a month but only $2,996 of interest; over 7 years, $383.46 a month and $7,210 of interest. After the first year the balance is still $20,718 — term choice is a price decision, and the price is the interest total.
Frequently Asked Questions
What is the difference between the interest rate and APR?
The interest rate prices the money. APR prices the money plus most upfront fees, expressed as a rate, which is why APR is always equal to or higher than the rate on the same loan. US lenders must disclose APR under the Truth in Lending Act. Compare loans by APR and by total repayment; on a fee-free loan the two rates coincide.
How does my credit score affect the rate I get?
Substantially. Personal loan pricing commonly spans from single digits for excellent credit to above 30% for poor credit on the same product. On a $25,000 5-year loan, that range is the difference between roughly $3,000 and over $18,000 of interest. Checking your rate with a soft inquiry first — most online lenders offer this — does not affect your score.
Are there penalties for paying a loan off early?
Sometimes on personal and auto loans; federal law restricts them on mortgages. A prepayment penalty is usually a percentage of the remaining balance or a few months of interest, and it fades after the first years. Read the note before signing — and if you plan to overpay, a loan without a penalty is worth a slightly higher rate.
Fixed or variable rate — which should I choose?
For terms under about five years, fixed is the default sensible choice: the payment cannot move. Variable rates start lower but follow a benchmark (usually prime or SOFR) — on a long term they can rise well past the fixed alternative. Variable only makes sense if you would still afford the payment two or three points higher, or plan to clear the loan quickly.
Estimates, not advice. This calculator provides educational estimates based on the inputs you enter and the assumptions shown on this page. It is not financial, tax or investment advice, and it cannot see your full situation. Verify important figures against official sources, and consider a qualified professional for decisions about your own money. See our Disclaimer and Methodology.