Loan Calculator

A loan is money borrowed today and paid back later with interest. Almost every loan falls into one of three repayment patterns: steady payments that pay the loan down over time, a single payment of principal plus interest at the end, or a fixed sum at maturity in exchange for a smaller amount upfront. Choose the pattern above that matches your loan.

Amortized Loan: Fixed Amount Paid Periodically

Most consumer debt, including mortgages, auto loans, student loans and personal loans, is amortized. You pay the same amount on a regular schedule, and each payment covers that period's interest first, with the remainder reducing the balance. Because the balance falls with every payment, the interest portion shrinks and the principal portion grows until the final payment clears the loan.

For a $100,000 loan at 6% compounded monthly over 10 years with monthly payments, each payment is $1,110.21. The 120 payments total $133,224.60, so the loan costs $33,224.60 in interest. Paying every two weeks instead, with the same compounding, makes each payment about $511.71 and trims total interest to roughly $33,046.

PMT = P × r ÷ [1 − (1 + r)⁻ⁿ] · Due = P(1 + i)ᵗ · Received = F ÷ (1 + i)ᵗ

P

loan amount

r

interest rate per payment period

n

number of payments

i

effective annual interest rate

t

term in years

F

predetermined amount due at maturity (face value)

When interest compounds on a different schedule from payments, the rate per payment period is r = (1 + i)^(1/m) − 1, where m is the number of payments per year.

Deferred Payment Loan: Single Lump Sum Due at Loan Maturity

Some loans require no payments until the end, when the borrower repays the principal and all accumulated interest at once. Interest compounds on the growing balance the whole time, so the final bill can be large. Bridge loans, some business and short-term commercial loans, and certain promissory notes work this way. Deferred student loans and payday loans share the same idea of interest piling up before repayment begins.

Borrowing $100,000 at 6% compounded monthly for 10 years with nothing paid along the way leaves $181,939.67 due at maturity: $81,939.67 of interest, far more than the $33,225 an amortized loan would cost because no principal is repaid early.

Bond: Predetermined Lump Sum Paid at Loan Maturity

A bond reverses the question. The borrower promises a fixed amount, the face or par value, on the maturity date, and the lender pays less than that today. The difference is the interest. Zero-coupon bonds, US Treasury bills and US savings bonds sold at a discount all follow this pattern. The calculator answers: given the amount due at maturity, the rate and the term, how much does the borrower receive now?

A bond promising $100,000 in 10 years at 6% compounded monthly is worth $54,963.27 today, so the lender earns $45,036.73 in interest. Many bonds also pay periodic coupons; for those, use the bond calculator, which prices both the coupons and the face value.

Loan Basics for Borrowers

Three numbers drive the cost of any loan: the interest rate, how often interest compounds and how long you take to repay. Understanding each one makes it easier to compare offers and spot an expensive loan.

Interest Rate

The interest rate is the price of borrowing, stated as a yearly percentage of the balance. Lenders set it based on market rates, your credit score and income, the loan's term and whether it is secured. In the US, lenders must disclose the annual percentage rate (APR), which folds required fees into the rate so loans with different fee structures can be compared. A loan with a lower stated rate but high origination fees can have a higher APR than a slightly higher-rate loan with no fees.

Compounding Frequency

Compounding is how often unpaid interest is added to the balance. More frequent compounding raises the effective cost: 6% compounded monthly works out to about 6.17% a year, and compounded daily about 6.18%. Most US consumer loans compound monthly, matching the payment schedule, while credit cards typically compute interest daily. The compound interest calculator converts any rate between frequencies.

Loan Term

The term is how long you have to repay. A longer term lowers each payment but means paying interest for more years, so the total cost rises. On a $100,000 loan at 6%, stretching the term from 10 to 20 years cuts the monthly payment from about $1,110 to about $716, yet total interest more than doubles. Choose the shortest term whose payment fits comfortably in your budget.

Consumer Loans

Loans to individuals fall into two broad groups, depending on whether something of value backs the debt.

Secured Loans

A secured loan is backed by collateral, an asset the lender can claim if you stop paying. A mortgage is secured by the home, an auto loan by the car, and a home equity loan or HELOC by your equity in the property. Because collateral reduces the lender's risk, secured loans usually offer lower rates, higher limits and longer terms. The risk shifts to you: missed payments can lead to foreclosure or repossession, and the lender may also require insurance on the asset.

Unsecured Loans

Unsecured loans have no collateral, so the lender relies on your creditworthiness: your credit history, income and existing debts. Credit cards, most personal loans, student loans and lines of credit are unsecured. They carry higher rates to compensate for the extra risk, and approval and pricing depend heavily on your credit score. Defaulting does not cost you a specific asset, but it damages your credit, can send the debt to collections and may lead to a court judgment or wage garnishment.

Before borrowing, compare the APR, the total interest over the life of the loan and any fees for origination, late payment or early payoff. Borrowing only what you need and repaying it quickly is the surest way to keep a loan cheap.

Frequently asked questions

Sources

• CFPB – What is the difference between a loan's interest rate and its APR?
• TreasuryDirect – Treasury Bills