How this is calculated
monthly = P × r ÷ (1 − (1 + r)^−n), where r = APR ÷ 12 and n = months
The monthly payment comes from the standard amortization formula, which finds the one fixed payment that exactly pays off the balance — principal plus accruing interest — by the end of the term. Early payments are mostly interest; late payments are mostly principal, which is why the balance chart falls slowly at first and steeply at the end.
The two numbers under the payment tell the real story. 'Total you'll pay' is the payment times the number of months; the gap between that and the amount you borrowed is the price of the loan. A $25,000 loan at 8% over five years costs about $5,400 in interest — stretch it to eight years and the payment falls, but the interest bill climbs past $9,000.
That's the core trade of borrowing: longer terms buy lower payments with more total interest. When comparing offers, compare APRs and total interest for the same term — a slightly lower payment from a longer term is not a better deal, just a slower one.
Frequently asked questions
What's the difference between interest rate and APR?
APR includes mandatory fees rolled into the cost of credit, so it's the honest comparison number. For a no-fee loan they're the same. This tool treats your input as the effective annual rate compounded monthly.
Does paying extra each month help?
Enormously, especially early — extra payments go straight to principal, shrinking every future interest charge. Even rounding a $483 payment up to $500 shortens the loan by months.
Does this work for mortgages and car loans?
Yes — the amortization math is identical. Mortgages add escrow items (property tax, insurance) on top of the payment shown here, and our mortgage-specific calculator handles the down-payment side.