Loan calculator

How the monthly payment is calculated

A fixed-rate loan is a promise to hand back a borrowed sum plus interest over an agreed number of periods. Interest is charged on whatever is still outstanding, so it shrinks as you repay. That single fact is what makes loan arithmetic unintuitive: your payment stays flat, but what it buys you changes every month.

For an annuity loan — the flat-payment kind almost every mortgage and car loan uses — the payment comes from the standard annuity formula:

payment = P × r / (1 − (1 + r)^−n)

P is the amount borrowed, r is the monthly interest rate (the annual rate divided by twelve), and n is the number of monthly payments. Borrow 200,000 at 6% over 30 years and the formula returns 1,199.10 a month. All 360 payments are identical, but the first is roughly 1,000 of interest and 199 of principal, while the last is almost entirely principal.

Where your money actually goes

The interest share shown above the schedule is the number most worth looking at. On a 30-year loan at 6%, total interest comes to more than 115% of the amount borrowed — you repay well over twice what you received. Halve the term to 15 years and the payment rises by around 40%, but total interest falls by roughly 60%. Term length moves the total cost far more than most borrowers expect, and far more than a small difference in headline rate.

This is why the yearly schedule rewards reading rather than skimming. Through the first third of a long loan, most of what leaves your account is rent on money you still owe, and the balance column barely moves. Only past the midpoint does the principal column start to dominate, and from there the loan unwinds quickly.

Annuity versus equal principal

Under equal principal, you repay the same slice of the balance every month and pay interest on whatever is left. The first payment is the largest and every payment after it is smaller. Total interest is always lower than the annuity equivalent, because the balance falls faster from day one.

The catch is affordability at the start. Switch the calculator between the two methods with the same inputs and compare the first payment: on a long loan, equal principal typically opens 15–25% higher. Lenders assess you against that opening figure, so the cheaper method can also be the harder one to qualify for. Many borrowers are better served by taking the annuity loan and overpaying voluntarily, which produces a similar saving without committing to the higher payment.

What this calculator leaves out on purpose

• Fees and insurance. Arrangement fees, mortgage insurance, and property taxes collected alongside the payment are excluded, so the figure here is principal and interest only.
• Tax relief. Several countries offer a deduction or credit on mortgage interest. Where it applies, your effective cost is lower than the total interest shown.
• Early repayment penalties. Some fixed-rate loans charge for overpaying. Check your agreement before assuming an overpayment strategy is free.

Leaving these out is deliberate. They vary by country, lender, and year, and folding a guess at them into the result would make the number look more authoritative than it deserves to be. Use this as the baseline, then add the costs you actually know about.

Reading the result honestly

A payment you can only just afford today is a payment you cannot afford. Rates reset and incomes pause; the schedule does not. A reasonable habit is to run the numbers twice — once at the rate you have been quoted, and once two or three percentage points higher — and treat the second figure as the real test of whether the loan fits.

This tool is for planning, not advice. It has no view on your circumstances and no knowledge of your local rules. Use it to understand the shape of a loan before you talk to a lender, and confirm the final figures against the agreement you are actually offered.