HesapHanem

Personal Loan Calculator

Monthly payment and total interest

How it is calculated

The monthly payment of a fixed-rate loan with equal instalments is M = P × r × (1 + r)ⁿ ÷ ((1 + r)ⁿ − 1). P is the amount borrowed, n is the number of months, and r is the monthly rate: r = annual rate % ÷ 100 ÷ 12. The annual rate is entered as a plain percentage (12 for 12%) and is simply divided by 12; the tool does not compound it. If the rate is 0, the payment is just P ÷ n. The total repaid is M × n, calculated from the unrounded payment, and total interest is the total repaid minus P. Amount and term must be above zero and the rate cannot be negative. Fees, insurance, early-repayment charges and taxes are not included. Many lenders add them, and in some countries they are large, so the real cost can be higher than shown. The dollar sign is a display symbol only.

Worked example

Borrow 15,000 at 12% a year for 36 months. Monthly rate r = 12 ÷ 100 ÷ 12 = 0.01. (1.01)³⁶ ≈ 1.43077. Payment = 15,000 × 0.01 × 1.43077 ÷ 0.43077 ≈ $498.21. Total repaid = 498.2148 × 36 ≈ $17,935.73, so total interest = 17,935.73 − 15,000 = $2,935.73, about 19.6% of the amount borrowed.

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Common mistakes

  • Entering the term in years. The field counts months, so a 3-year loan is 36, not 3.
  • Using the monthly rate in the annual rate field, or the other way round. Type the yearly percentage.
  • Entering the rate as 0.12. That means 0.12% a year, which makes the loan look almost free.
  • Comparing offers by the monthly payment only. A longer term lowers the payment but raises the total interest; compare total repaid as well.
  • Ignoring fees and insurance. If the lender charges them, the effective cost is higher than this calculation, and a quoted rate may differ from the effective annual rate.

Sources

About this calculator

This calculator uses the standard amortization formula for a fixed-rate installment loan: M = P × r × (1 + r)ⁿ ÷ [(1 + r)ⁿ − 1], where P is the loan amount, r is the monthly interest rate (annual rate ÷ 12), and n is the number of monthly payments. That fixed monthly payment M covers a shrinking amount of interest and a growing amount of principal each month, and multiplying M by n and subtracting P gives total interest paid.

Borrowers use it to compare loan offers with different rates and terms — a lower rate over a longer term can still cost more in total interest than a shorter, higher-rate loan — and to see the real cost of a personal loan (for debt consolidation, home repairs, or a large purchase) before signing, since lenders quote the rate but rarely spell out the total interest in advance.

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Comments (1)

  • Editorial team

    The result assumes you keep the loan to the end with no extra payments. If you plan to pay it off early, the interest you actually pay will be lower than the total shown, but check the contract for early-repayment charges first. A quick way to compare two offers is to run both and look at total interest, not only the monthly payment. What rate and term are you weighing?

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