Loan Calculator

Understanding your loan payment

Fixed-rate installment loans — auto loans, personal loans, most student loans — use the same amortization math as a mortgage. The calculator shows the payment, the total interest over the life of the loan, and the month-by-month balance so you can see the real cost of borrowing, not just the sticker payment.

Why the monthly payment is the wrong thing to shop on

Lenders and dealers know that most borrowers decide on the monthly figure, and a longer term is the easiest way to make any payment look affordable. The arithmetic is unforgiving: at 7.9%, a $25,000 loan over 48 months costs about $4,200 in interest, while the same loan over 72 months costs about $6,400. The monthly payment falls by roughly $170, which feels like a saving, but you pay over $2,000 more for the privilege.

Longer car loans carry a second, less visible risk. Vehicles depreciate faster than a stretched loan amortises, so for a long stretch of the term you owe more than the car is worth. If it is written off or you need to sell, the shortfall is yours to cover. Watch the balance line on the chart above against what you think the asset will be worth.

What actually sets your rate

Credit score does most of the work, and the spread is wide: the gap between excellent and fair credit is often five to ten percentage points on the same loan, which on a $25,000 balance is thousands of dollars. Whether the loan is secured matters almost as much — an auto loan backed by the car itself prices well below an unsecured personal loan, because the lender can recover something if you stop paying. Term length, loan size and your debt-to-income ratio fill in the rest.

This is why shopping around pays even when it feels tedious. Credit bureaus generally treat multiple loan enquiries within a short window as a single event for scoring purposes, so collecting several quotes over a couple of weeks does not repeatedly damage your score. Compare APRs rather than headline rates, because APR includes mandatory fees and origination charges — a 6.9% rate with a 5% origination fee is more expensive than an 8.5% loan with none.

Paying early, and when it is worth it

Because interest accrues on the outstanding balance, every extra dollar of principal removes all the future interest that dollar would have generated. Extra payments early in the term are therefore worth far more than the same payments later, when most of the balance is already repaid. Adding $100 a month to a typical five-year car loan usually clears it around a year early.

Check the agreement first. Prepayment penalties are rare on US auto loans but do appear on some personal and older mortgage products. Confirm too that additional payments are applied to principal rather than held against next month's instalment, which some servicers do by default and which produces none of the benefit.

Where a loan sits against other options

Before borrowing, compare the rate to what the money could otherwise do. Paying down a 22% credit card balance is a guaranteed 22% return and beats almost any investment; borrowing at 7% to preserve savings earning 4% costs you three points a year. If the loan is for a home, our mortgage calculator handles taxes, insurance and PMI. If you are weighing borrowing against saving up first, the savings goal calculator shows what waiting would require.

Frequently asked questions