Loan Calculator

A loan calculator uses the amortization formula to break down your monthly payment into its two components: principal (which reduces your balance) and interest (the cost of borrowing). Understanding this split is key to making smart borrowing decisions.

Amortization works in your lender's favor early in the loan. On a 30-year mortgage, roughly 75–80% of your first payment goes to interest and only 20–25% reduces your balance. By year 25, the ratio reverses. This is why paying off a mortgage early — even with small extra payments — saves a disproportionately large amount of interest.

When comparing loan offers, always look at the APR (Annual Percentage Rate) rather than just the stated interest rate. The APR includes lender fees, points, and other costs rolled into one annualized figure. Two loans with the same interest rate can have very different APRs based on their fees.

The loan term dramatically affects total cost. A 15-year mortgage at 7% on $300,000 costs about $484,000 total. The same mortgage over 30 years costs about $718,000 — $234,000 more, simply from extending the timeline. The monthly payment is lower, but the long-term cost is enormous.

To lower your total interest paid: make extra principal payments whenever possible, choose the shortest loan term you can comfortably afford, and refinance when rates drop significantly below your current rate (typically 1%+ lower, with a break-even under 3 years). Even rounding up your monthly payment to the nearest $50 or $100 can save thousands and cut months off your loan.

This calculator applies to any fixed-rate amortizing loan: home mortgages, auto loans, personal loans, and student loans all use the same formula.