How to Calculate a Loan Payment and Amortization Schedule

A search box can tell you a monthly payment. It won’t show you the month-by-month breakdown — how much goes to interest, how much to the balance, and how extra payments change everything. Here’s how it actually works.

The monthly payment formula

A fixed-rate loan uses one standard formula to find the level monthly payment:

where P is the loan amount, r is the monthly interest rate (annual rate ÷ 12), and n is the number of monthly payments (years × 12).

Worked example: a $20,000 loan at 7% APR over 5 years (60 months). The monthly rate is 0.07 ÷ 12 ≈ 0.005833. Plugging in gives a payment of about $396.02 per month, and about $3,761 in total interest over the life of the loan.

What amortization means (and why it matters)

“Amortization” is just the schedule of how each payment splits between interest and principal (the balance). The payment stays the same every month, but the split changes:

• Early on, the balance is large, so most of your payment is interest and little goes to the balance.
• Later on, the balance is small, so most of your payment goes to principal and little to interest.

That’s why, in the first years of a loan, the balance barely seems to move — you’re mostly paying interest. A full amortization schedule shows this month by month, and a search-box answer can’t.

Why extra payments save so much

Interest is charged on the remaining balance. So any extra amount you pay goes straight to principal, shrinking the balance that all future interest is calculated on. The effect compounds.

Example: on that same $20,000 / 7% / 5-year loan, paying just $100 extra per month saves around $894 in interest and clears the loan about 13 months early. You can test any extra amount in the tool and watch the schedule shorten.

Step by step: calculate your loan

1. Open the Loan Calculator and enter the loan amount.
2. Enter the interest rate (APR) and the term in years (and months, if any).
3. Read your monthly payment and total interest at the top.
4. Scroll to the amortization schedule to see each period’s interest, principal and balance.
5. Try an extra monthly payment to see how much interest and time you’d save.

Works for any fixed-rate loan

The same math applies whether it’s an auto loan, a personal loan, a student loan or any other fixed-rate, fixed-term loan. Just enter that loan’s amount, rate and term.

FAQ

Is APR the same as the monthly rate?
No. APR is the annual rate. Divide it by 12 to get the monthly rate used in the formula.

Why is my early balance dropping so slowly?
Because early payments are mostly interest. The amortization schedule shows exactly how the split shifts toward principal over time.

Does the calculator include taxes, fees or insurance?
The payment shown is principal and interest only. Loan-specific fees vary — check your loan agreement.

Are my numbers sent anywhere?
No. The calculation runs entirely in your browser. Nothing you type is uploaded.