How to calculate the monthly payment on a loan
Before signing for a personal loan, car finance or a student loan, it pays to know how much you will hand over each month and whether it fits your income. This calculator takes just three figures, the amount, the annual interest or profit rate and the term in years, and returns the fixed monthly payment.
It uses the standard fixed-payment amortisation formula, the reducing-balance method: interest is charged each month on the remaining balance, and repayment is spread over equal instalments. Everything is calculated in your browser and your figures are not sent anywhere.
How to use it
- Enter the loan amount in "Amount".
- Enter the yearly rate in "Annual interest %", for example 5.
- Enter the repayment period in "Term (years)", for example 5.
- Press "Calculate payment" to see the "Monthly payment", rounded to two decimals.
How the calculation works
- The annual rate is divided by 12 to get a monthly rate, and the years are multiplied by 12 to get the number of payments.
- The fixed-payment formula is applied: payment = P × r × (1 + r)^n ÷ ((1 + r)^n − 1), where r is the monthly rate and n the number of months.
- With a 0% rate, the amount is simply divided by the number of months.
- You can enter a fractional term, such as 2.5 years for 30 months.
Example and practical uses
- Borrowing 50,000 at 5% over 5 years gives a monthly payment of 943.56. Multiply by 60 months for the total repaid (about 56,613.70), then subtract the amount borrowed for the cost of credit (about 6,613.70).
- Comparing two lenders by entering each rate with the same term.
- Testing different terms: a longer term lowers the payment but raises the total you pay.
- Checking before you apply that the payment fits within what you can set aside each month.
Important cautions
- Flat versus reducing rate: many personal finance offers, including some murabaha products, quote a flat rate charged on the original amount for the whole term. This calculator uses the reducing-balance method, so its result will be lower than a flat-rate payment at the same headline rate. For example, 50,000 at a flat 5% over five years means about 1,041.67 a month, not 943.56. Ask the lender for the annual percentage rate (APR) to compare fairly.
- Admin fees, insurance and other charges are not included.
- There is no amortisation table or total-interest figure, but you can derive both from the payment as shown above.
- The binding figure is the written offer from your lender; use this tool for estimates and comparisons.
For other money decisions, try the ROI calculator, the percentage calculator to see what share of your salary the payment takes, and the currency converter if the loan is in a different currency from your income.