Loan Calculator — Step-by-Step Solutions
The Loan Calculator helps you work out monthly payments, total interest costs, and how much you can afford to borrow. It supports four modes: monthly payment calculation, total interest over the loan term, maximum borrowing capacity based on your budget, and a side-by-side loan comparison.
Enter your loan amount, interest rate, and term to get instant results with a full amortisation breakdown showing how your payments split between principal and interest.
Your calculations will appear here
How to Use the Loan Calculator
- Select a mode: Monthly Payment, Total Interest, How Much Can I Borrow, or Loan Comparison.
- Enter the loan amount, annual interest rate, and loan term in years.
- For the "How Much Can I Borrow" mode, enter your monthly budget instead of the loan amount.
- For the "Loan Comparison" mode, enter the details of both loans to compare them side by side.
- Results update instantly as you type. Review the step-by-step working and the visual breakdown chart below.
Formula and Theory
The monthly payment on a fixed-rate loan is calculated using the PMT formula: M = P * [r(1+r)^n] / [(1+r)^n - 1], where P is the principal (loan amount), r is the monthly interest rate (annual rate divided by 12), and n is the total number of monthly payments.
The total interest paid over the life of a loan equals the sum of all monthly payments minus the original principal. For longer loan terms, monthly payments are lower but total interest is significantly higher because the principal is outstanding for more time.
To find the maximum loan you can afford from a monthly budget, the PMT formula is rearranged: P = M * [(1+r)^n - 1] / [r(1+r)^n]. This tells you the largest principal that your monthly payment can support at the given rate and term.
Comparing two loans side by side reveals the true cost difference. A lower interest rate or shorter term can save thousands in total interest, even if the monthly payment is higher.
Worked Examples
Example 1: Car loan monthly payment
Problem: Calculate the monthly payment for a 25,000 car loan at 5.5% over 5 years.
Solution: r = 0.055/12 = 0.004583. n = 60. M = 25,000 * [0.004583 * 1.004583^60] / [1.004583^60 - 1].
Answer: 477.53 per month
Example 2: Total interest on a personal loan
Problem: Find the total interest paid on a 10,000 loan at 8% over 3 years.
Solution: Monthly payment = 313.36. Total paid = 313.36 * 36 = 11,281.01. Total interest = 11,281.01 - 10,000.
Answer: 1,281.01 in total interest
Example 3: How much can I borrow?
Problem: With a monthly budget of 400 at 6% over 5 years, what is the maximum loan?
Solution: P = 400 * [(1.005)^60 - 1] / [0.005 * (1.005)^60]. P = 400 * 51.73 = 20,691.
Answer: Maximum loan of approximately 20,691
Example 4: Comparing two car loans
Problem: Compare a 20,000 loan at 6% for 5 years versus 4% for 3 years.
Solution: Loan A: 386.66/month, total interest 3,199.35. Loan B: 590.48/month, total interest 1,257.16.
Answer: Loan B saves 1,942.19 in interest but costs 203.82 more per month
Frequently Asked Questions
What is the PMT formula?
How does the loan term affect total cost?
What is the difference between APR and interest rate?
Can I pay off a loan early?
What happens if I miss a payment?
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