Loan Calculator
Calculate monthly payments, total interest, and view a complete amortization schedule. See how extra payments can save you thousands.
Loan Details
🌟 Extra Payment Savings
Loan Payment Formula
The standard amortizing loan formula calculates a fixed monthly payment that covers both principal and interest over the loan term:
Total Interest = (M × n) − P
When you make extra payments, they go directly toward reducing the principal balance, which reduces future interest charges and shortens the loan term.
How Loan Amortization Works
With an amortizing loan, each monthly payment is split between interest and principal. Early payments are mostly interest, while later payments are mostly principal:
- Early payments (Year 1–2): Most of your payment goes to interest. For a ₹25,000 loan at 6.5%, about 54% of your first payment is interest.
- Middle payments: The split equalizes as principal is paid down. Your interest portion shrinks each month.
- Final payments: Nearly all payment goes to principal with minimal interest charges.
- Extra payments: Any amount above the minimum goes directly to principal reduction, accelerating payoff and reducing total interest.
Common Loan Types & Typical Rates
This calculator works for any fixed-rate amortizing loan. Here are common types and their typical interest rate ranges:
- Personal Loans: 6%–36% APR. Unsecured loans for debt consolidation, home improvement, or major purchases. Terms typically 2–7 years.
- Auto Loans: 4%–12% APR. Secured by the vehicle. Terms typically 3–7 years. New cars usually get lower rates.
- Student Loans: 4%–8% (federal) or 3%–15% (private). Repayment terms of 10–25 years depending on the plan.
- Home Equity Loans: 6%–10% APR. Secured by your home equity. Fixed rate and term, typically 5–30 years.
- Small Business Loans: 6%–20% APR. Terms from 1–25 years depending on loan type and lender.
Strategies to Pay Off Your Loan Faster
- Round up payments: If your payment is ₹483, pay ₹500 instead. The extra ₹17/month adds up significantly over the loan term.
- Make bi-weekly payments: Pay half your monthly amount every two weeks. You'll make 26 half-payments (13 full payments) per year instead of 12.
- Apply windfalls: Use tax refunds, bonuses, or other unexpected income as lump-sum principal payments.
- Refinance if rates drop: If interest rates fall 1%+ below your current rate, refinancing could save you thousands.
- Avoid extending the term: When refinancing, try to keep or shorten the remaining term to maximize interest savings.
Frequently Asked Questions
How is my monthly payment calculated?
Your monthly payment is calculated using the standard amortization formula: M = P × [r(1+r)^n] / [(1+r)^n − 1], where P is the loan amount, r is the monthly interest rate (annual rate ÷ 12), and n is the total number of monthly payments. This formula ensures equal payments throughout the loan term.
How much can I save with extra payments?
Even small extra payments can save significant money. For example, adding ₹50/month to a ₹25,000 loan at 6.5% for 5 years saves about ₹540 in interest and pays off the loan 5 months early. Use the extra payment field above to see your exact savings.
What is amortization?
Amortization is the process of spreading loan payments over time. Each payment covers interest on the remaining balance plus a portion of principal. As you pay down the balance, more of each payment goes toward principal and less toward interest.
What is the difference between APR and interest rate?
The interest rate is the cost of borrowing the principal. APR (Annual Percentage Rate) includes the interest rate plus any fees and charges, giving you the true annual cost. For this calculator, enter your APR for the most accurate results.
Should I pay off my loan early or invest?
If your loan’s interest rate is higher than what you can earn investing (after taxes), pay off the loan first. If your rate is low (under 4-5%), investing may yield better returns. Also consider the psychological benefit of being debt-free and check for prepayment penalties.