English
How to use the loan calculator
This loan calculator shows the monthly payment, total interest and a full amortization schedule for a mortgage, car loan, personal loan or any fixed-rate installment plan. It supports the two interest methods you are most likely to be quoted: reducing balance and flat rate.
- Choose the interest method. Most mortgages and bank loans use reducing balance. Many car and motorbike dealers quote a flat rate.
- Enter the amount you are borrowing, after any down payment.
- Enter the annual interest rate and the term, in years or months.
- Read the monthly payment, totals and the schedule. Tap the button under the table to see every month instead of the first 12.
Reducing balance (annuity) formula
With a reducing balance, each month's interest is charged only on what you still owe. The payment stays the same, but the interest part shrinks and the principal part grows over time. The fixed payment comes from the standard annuity formula:
Payment = P × i ÷ (1 − (1 + i)^−n)
Interest this month = balance × i
Principal this month = payment − interest
Example: a 250,000 mortgage at 6.5% for 30 years (360 months) costs about 1,580.17 a month. In the first month, 1,354.17 of that is interest and only 226.00 repays the loan. Over the full term you pay about 318,861 in interest, more than the amount borrowed. The schedule makes this visible: on a long loan, the balance falls slowly at first and faster near the end.
Flat rate formula
A flat rate charges interest on the original loan amount for the entire term, even though you repay part of it every month. It is simple to calculate, which is why it appears in dealer financing:
Principal per month = P ÷ n
Payment = principal per month + interest per month
Example: 20,000 at 5% flat for 3 years means 3,000 of interest (20,000 × 5% × 3), so the payment is 23,000 ÷ 36 = 638.89 a month.
Flat rate vs reducing balance compared
The same headline rate means very different costs. Here is the 20,000, 3-year, 5% loan under both methods:
| Method | Monthly payment | Total interest |
|---|---|---|
| Reducing balance 5% | 599.42 | 1,579.05 |
| Flat rate 5% | 638.89 | 3,000.00 |
To compare offers fairly, the calculator converts between the two. With Flat rate selected it shows the equivalent effective rate: 5% flat over 3 years works out at about 9.3% on a reducing balance. With Reducing balance selected it shows the flat rate that would cost the same total interest. Always compare loans on the same basis, ideally the effective rate.
Tips for using the results
- Shorter terms cost less overall. The monthly payment rises, but total interest drops, often sharply on mortgages.
- Watch fixed-then-floating deals. Many mortgages fix the rate for a few years, then switch to a variable rate. This calculator assumes one rate for the whole term, so run a second scenario with a higher rate to see the risk.
- Extra payments. Paying more than the scheduled amount usually reduces the balance and the remaining interest, but check for early repayment penalties.
Limits
Results are estimates for planning. Lenders may add origination or admin fees, compulsory insurance, taxes or other charges, may round each payment differently, or may calculate interest daily. The schedule assumes equal monthly payments starting one month after the loan begins. Ask your lender for the official repayment schedule and the total cost before you sign. Nothing you enter is sent anywhere; the calculation runs in your browser.
Frequently asked questions
How is a monthly loan payment calculated?
For a standard amortizing loan, payment = P × i ÷ (1 − (1 + i)^−n), where P is the amount borrowed, i is the annual rate ÷ 12 ÷ 100 and n is the number of months. 250,000 at 6.5% over 30 years is about 1,580.17 a month.
What is the difference between flat rate and reducing balance interest?
Flat rate charges interest on the original amount for the whole term. Reducing balance charges interest only on what you still owe, so the interest part shrinks every month. At the same quoted rate, a flat rate costs considerably more.
How do I convert a flat interest rate to an effective rate?
Find the reducing-balance rate that gives the same monthly payment. Choose Flat rate here and the calculator shows the equivalent effective rate. For example, 5% flat over 3 years is roughly 9.3% effective per year.
What is an amortization schedule?
It is a table of every payment showing how much goes to interest, how much repays the principal and the balance left afterwards. Early payments on a long mortgage are mostly interest.
Is this the exact amount my lender will charge?
Treat it as an estimate. Lenders may add admin fees, insurance, taxes or round differently, and some loans have variable rates. Ask the lender for the official repayment schedule before signing.