How to Calculate Loan
What is Loan?
Loan amortization spreads equal payments over the loan term. Each payment first covers accrued interest, with the remainder reducing the principal. Early payments are mostly interest; later ones mostly principal.
Step-by-Step Guide
- 1Convert annual rate to monthly: r = annual rate ÷ 12
- 2Calculate n = total payments (years × 12)
- 3Apply: M = P × r(1+r)ⁿ / ((1+r)ⁿ − 1)
- 4Total interest = (M × n) − P
Worked Examples
Input
$10,000 at 6% for 3 yrs
Result
$304.22/mo
Total interest: $951.92
Input
$250,000 at 7% for 30 yrs
Result
$1,663/mo
Total interest: $348,773