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    DEBT & REPAYMENT

    What will your loan cost each month?

    Calculate a fixed monthly payment and see how it divides into principal and interest. Add a recurring extra payment to find the earlier payoff date and total financing cost.

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    Your planning assumptions

    Start with the example, then change the inputs.

    Your planning assumptions
    Use one currency for every amount. Enter 5,000 for five thousand; changing the currency label does not convert your inputs.
    Amount borrowed at the start, in the selected currency. Fees and insurance are not included.
    0–100%. Monthly rate = this rate ÷ 12. Not a fee-inclusive APR.
    Whole monthly payments from 1 to 600; first payment at the end of month 1.
    Nonnegative recurring amount paid with each scheduled payment; no prepayment fees modeled.

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    Methodology

    Interest applies to the remaining principal.

    The base payment amortizes the borrowed amount over the original term at a fixed nominal annual rate divided by 12. Each month, interest equals the opening balance multiplied by that monthly rate. The rest of the payment reduces principal.

    An extra payment reduces the balance and can shorten the term; it does not reduce the original scheduled payment. At zero interest, the scheduled payment is principal divided by months. The final payment is capped at the remaining balance plus that month’s interest.

    Monthly rate r = nominal annual rate ÷ 12
    Payment = principal × r ÷ (1 − (1 + r)^(−months))
    At r = 0: payment = principal ÷ months
    Interest = opening balance × r
    Closing balance = opening balance − principal paid

    Illustrative worked example

    The form starts with a 36-month loan. For a short hand calculation, borrow $1,200 for two months at 12% nominal annual interest. The monthly rate is 1% and the scheduled payment is about $609.01. Month 1 interest is $12 and principal repayment is about $597.01. Month 2 interest is about $6.03; total interest is about $18.03.

    Worked example values
    MeasureIllustrative result
    Scheduled payment before extras$609.01
    First month interest$12.00
    Second month interest$6.03
    Total interest$18.03

    Assumptions and limits

    • No origination fees, insurance, taxes, late charges, daily accrual, variable rates, payment holidays or balloon balance are included.
    • This input is a nominal annual rate with monthly compounding. Convert an effective annual rate or consult the contract before using it. APR including fees is a different measure.
    • A lender that rounds each month’s interest and payment to cents may quote a different final payment. Compare this estimate with the repayment schedule in your loan agreement.
    • Extra payments are assumed to reduce principal immediately at payment time, with no penalty or recast. Confirm the lender’s rules.

    Why can a longer term lower payments but increase interest?

    Spreading repayment over more months reduces the required monthly principal reduction. Principal then remains outstanding longer, so more interest can accrue at the same positive rate. Compare total interest as well as the monthly payment; zero-rate financing has no interest trade-off in this model.

    Primary methodology references

    CFPB: amortization and principal versus interest. Amortizing payments divide into interest and principal, with the split changing as the balance falls. Fixed nominal monthly timing is the explicit model convention here.

    Worked examples explain the calculation, not expected business results.