Quick facts
- •On a 30-year loan at 6%, about 83 cents of every dollar in your first payment is interest. It takes years before the principal starts to shrink noticeably.
- •Paying an extra $100 a month on a $250,000, 30-year loan at 6% clears it about 4½ years early and saves roughly $51,600 in interest.
- •Total cost of a loan = monthly payment × number of payments. Subtract what you borrowed and what is left is the interest.
- •One percentage point matters: on $300,000 over 30 years, 7% instead of 6% costs about $71,000 more in interest.
- •A 0% APR loan has no interest at all. The payment is just the amount borrowed divided by the number of months.
Quick reference
| Loan term | Monthly payment | Total interest | Total repaid |
|---|---|---|---|
| 15 years | $1,742 | $113,599 | $313,599 |
| 20 years | $1,491 | $157,875 | $357,875 |
| 30 years | $1,264 | $255,089 | $455,089 |
Worked examples
A $25,000 car loan at 4.5% for 60 months: what does it really cost?
$466 a month, about $2,965 in interest, $27,965 in total
The payment sounds modest, but you repay roughly $2,965 more than the sticker price. That difference is what borrowing costs, and it rarely comes up in the showroom.
Same car, stretched to 72 months at the same rate?
$397 a month, but about $609 more interest
The payment falls by $69 a month, which feels like a win. The extra year of borrowing adds roughly $609 in interest. Longer loans always have lower payments and higher total costs at the same rate.
What does an extra $100 a month do on a $250,000 loan at 6%?
About 4½ years sooner and roughly $51,600 less interest
The standard 30-year term runs 360 months. With $100 extra each month it ends around month 306. The money saved is interest you never pay.
What if the loan is 0% APR over 48 months for $24,000?
$500 a month, with no interest
Divide $24,000 by 48. Zero-interest offers are real, but check whether you give up a cash discount or rebate to get them, because that discount is the hidden cost.
Comparing loans by monthly payment alone
The mistake
Choosing the loan with the lowest monthly payment without checking the total repaid.
Do this instead
Compare the total of all payments and the APR. In the US, lenders must disclose both. Use the calculator to run each offer with the same amount borrowed.
Why it matters
On a $300,000 loan at 6%, a 30-year term instead of 15 years lowers the payment from about $2,532 to $1,799 a month, but adds roughly $191,800 in interest.
Why a loan calculator matters
The monthly figure is only half the story
- •Lenders and car dealers lead with the monthly payment because it is the easiest number to say yes to.
- •It says nothing about how much you will have paid by the last instalment.
- •Multiply the payment by the number of months, then subtract the amount borrowed. That is your interest bill.
- •Check the number before you sign, not after the first statement arrives.
Extra payments work best early
- •Anything above the required payment goes straight to principal, so the interest on it stops immediately.
- •The same $100 saves more in year two than in year twenty, because there is more balance left to shrink.
- •Check that your lender applies extra money to principal and does not charge a prepayment penalty.
- •Use the calculator to see the exact month your payoff date moves.
Refinancing is a break-even question
- •A lower rate only helps if you keep the loan long enough to earn back the fees.
- •Restarting a 30-year clock can cost more in total interest even when the rate drops.
- •Divide the closing costs by the monthly saving. That is how many months until you are ahead.
- •Compare the old and new loan on total cost, not just on payment.
What makes this loan calculator useful
Full amortization schedule
See each payment split into interest and principal, so you know exactly when most of your money starts reducing the balance.
Extra payment impact
Add a monthly or one-off extra payment and see the new payoff date and the interest you save.
Handles 0% APR
Enter 0% and you still get a correct payment. Many simple calculators return an error because the standard formula divides by zero.
Weekly and fortnightly repayments
Switch the payment frequency to see how paying more often shortens the term. Common in the UK and Australia.
Professional applications
Car dealers and buyers
Sales conversations often start with a target monthly payment. Buyers can use a calculator to check what that payment means in total at different terms.
$25,000 at 4.5%: $466 over 60 months or $397 over 72 months, with about $609 more interest on the longer loan.
Mortgage brokers
Brokers run refinance scenarios to find the month where closing costs are earned back by the lower payment.
Refinancing $200,000 from 6% to 4% saves about $244 a month. With $4,500 in closing costs, break-even is roughly month 19.
Financial coaches
Coaches compare the guaranteed saving from paying down a loan with the uncertain return from investing.
Paying off a 7% loan is a guaranteed 7% return. A savings account paying 4% cannot match that.
Historical context
Frequently asked questions
How do I calculate the total cost of a loan?+
Multiply the monthly payment by the number of payments, then subtract the amount you borrowed. For a $25,000 loan paid at $466.08 for 60 months, that is $27,964.80 repaid and about $2,965 in interest. Add any fees to see the full cost.
What is the difference between interest rate and APR?+
The interest rate is the cost of borrowing the money. APR adds most lender fees and shows them as a yearly rate, so it is the better number for comparing offers. A loan with a lower rate but higher fees can have a higher APR.
Should I pay extra or invest the difference?+
Compare the loan rate with the return you can realistically expect after tax and risk. Paying down a 7% loan is a certain 7% saving. Investing may earn more but is not guaranteed. Many people keep an emergency fund first, then decide.
Can I use this for a car loan or personal loan?+
Yes. Enter the amount, the annual rate and the term in months or years. It works for any fixed-rate loan with equal payments. For a mortgage with taxes and insurance, use the Mortgage Calculator.
What this calculator cannot do+
It cannot predict a rate that changes over time, such as an adjustable-rate loan or a credit card. It does not know your lender’s fees, insurance requirements or prepayment rules, so treat the result as an estimate and compare it with the official loan disclosure.