Loan payment
Estimate a fixed monthly payment from the amount, the annual interest rate, and the years, using standard amortization.
Short answer
The monthly payment is the amount that pays the loan to zero over the term when interest is charged each month on the remaining balance.
How this works
Let r be the annual rate divided by 12 and by 100, and n the number of months. The payment is principal × r(1+r)^n ÷ ((1+r)^n − 1). If the rate is 0, the payment is principal ÷ n.
This ignores fees, insurance, taxes, and the difference between an interest rate and an APR. A lender’s quote can be higher. The Consumer Financial Protection Bureau explains how to read a real offer.
Examples
$10,000 at 6% for 3 years
About $304.22 a month. You repay about $10,951.84, of which about $951.84 is interest.
Common mistakes
- Entering the monthly rate again after the form already divides the annual rate by 12.
- Treating the result as an approval or a payoff quote.
Frequently asked questions
- Why is a 0% loan just the amount divided by the months?
- Because no interest accrues. Fees, if any, are not in this formula.
Related
- How a fixed loan payment is calculatedSee the standard amortization formula, and what a monthly estimate still leaves out of a lender’s quote.
- Principal and interest, separatelyTell the amount you borrowed from the cost of borrowing it, using the same payment every month.
- Percentage calculatorFind a percent of a number, what percent one number is of another, the change between two values, or a discount.