How it works
A fixed-rate loan uses the standard amortizing-payment formula:
M = P × [ r(1 + r)n ] / [ (1 + r)n − 1 ]
- M = monthly payment
- P = principal (amount borrowed)
- r = monthly interest rate (annual rate ÷ 12)
- n = total number of payments (years × 12)
Each payment covers that month's interest first; the remainder reduces the balance, so interest shrinks and principal grows over time.
Worked example
Borrow $25,000 over 5 years at 9%:
- Monthly rate r = 0.09 / 12 = 0.0075
- Payments n = 60
- Monthly payment M ≈ $519
- Total interest ≈ $6,137
How we check this calculator
Payments are computed with the standard annuity formula and cross-checked against the CFPB's loan-cost examples and an independent amortization schedule: the sum of all scheduled payments minus principal must equal total interest to the cent, and the balance after the final payment must be exactly zero. We also test degenerate inputs — 0% interest (payment = principal ÷ months) and one-month terms — after any change.