Monthly payment
$489.15
× 60 payments
Total interest
$4,349
17% of what you borrowed
Total repaid
$29,349
on $25,000 borrowed
Where your repayments go
How the Loan Calculator Works
The formula
The monthly payment comes from the standard amortisation formula: payment = principal × r ÷ (1 − (1 + r)⁻ⁿ), where r is the monthly rate (the annual rate divided by twelve) and n is the number of payments. It is built so that a constant monthly amount clears both the interest and the principal exactly at the end of the term. This same fixed payment is what an EMI — equated monthly instalment — refers to.
Why early payments are mostly interest
Interest is charged on what you still owe. At the start that balance is at its largest, so most of your payment goes on interest and only a little chips away at the principal. As the balance falls the interest shrinks and more of each identical payment goes to the principal. The schedule above makes the crossover visible — it is also why overpaying early saves so much more than overpaying late.
Interest rate or APR?
Enter the plain interest rate. APR bundles fees into a single comparable figure and is usually slightly higher, so it is the better number for comparing offers but the wrong one for working out a payment. The result here therefore excludes arrangement or origination fees. A 0% rate is handled correctly, since interest-free finance really does exist and the formula above breaks down at zero.
Frequently asked questions
How is a monthly loan payment calculated?
The standard amortisation formula is P = principal × r ÷ (1 − (1 + r)^−n), where r is the monthly interest rate (annual rate ÷ 12 ÷ 100) and n is the number of monthly payments. It produces a fixed payment that clears both the interest and the principal by the end of the term.
What is an EMI?
EMI stands for Equated Monthly Instalment — the fixed amount you pay each month over the life of a loan. It is the same figure as a monthly loan payment; the term is most common in India and parts of Asia. The instalment is 'equated' because it stays constant even though its interest and principal split changes every month.
Why is so much of my early payment interest?
Interest is charged on the balance still outstanding, which is at its largest at the start. Each month you pay interest on what remains, and only the leftover reduces the principal. As the balance falls, the interest portion shrinks and the principal portion grows — so payments late in the term barely include any interest at all.
Does paying extra each month save money?
Yes, and often more than people expect. Any extra payment goes straight to the principal, which reduces the balance every future month's interest is charged on. Paying extra early in the term saves the most, because that is when the balance — and so the interest — is highest.
What happens if the interest rate is 0%?
With no interest, the payment is simply the principal divided by the number of months, and the total repaid equals the amount borrowed. This calculator handles 0% correctly — genuinely interest-free finance deals do exist, and the usual formula breaks down at a zero rate.
Is APR the same as the interest rate?
Not quite. The interest rate is the cost of borrowing the principal, while the APR also folds in fees and charges, so it is usually a little higher. APR is the better figure for comparing offers. Enter the plain interest rate here; the result then excludes any arrangement fees.