The guide
What the monthly payment on a loan is made of
Every month you pay the lender one fixed amount. Part of it is the interest they charge for that month. The rest comes off what you owe. Because the amount you owe shrinks a little each time, the interest slice gets smaller and the slice that clears the debt gets bigger. The payment itself never changes. That is what people mean by an amortizing loan.
The size of the payment comes from three numbers, and nothing else: how much you borrow, the yearly rate, and how many months you have. Change any one of them and the payment moves. Stretching the term is the quickest way to lower a monthly payment, and also the quickest way to pay far more in total.
A worked example
Borrow $25,000 at 5.5% over five years. The payment is $477.53 a month. Over 60 payments you hand over $28,651.70, so the loan costs you $3,651.70 in interest, or about 14.6% of what you borrowed. In the very first month, $114.58 of that payment is interest and $362.95 comes off the balance. By the final month almost all of it clears the debt.
Now stretch the same loan to seven years. The payment drops to $359.25, which looks like a win. But you make 84 of them, so the total becomes $30,177.10 and the interest bill rises to $5,177.10. A lower payment cost you an extra $1,525 for the same $25,000. Try both in the calculator above and watch the green slice of the donut grow.
How to compare two loan offers
Compare the APR, not the headline rate. The rate is the price of the money on its own. The APR adds the fees you pay to get the loan and expresses everything as one yearly percentage, which is why it is usually the higher number. A loan with a lower rate and a large origination fee can easily cost you more than one with a slightly higher rate and no fee.
- Put both offers into the calculator using their APRs, over the same term.
- Compare the total paid, not just the monthly payment.
- Check whether either contract charges a fee for paying off early.
- Ask whether any fee is deducted from the money you receive or added to the balance.
What paying a little extra does
An extra payment goes straight at the balance, so it also removes all the interest that balance would have earned for the rest of the term. On the $25,000 loan above, an extra $50 a month clears it six months early and saves about $401 in interest. Tell your lender the extra is for the principal, or it may sit in the account as an early version of next month’s payment instead.
Why a “flat rate” costs nearly double what it says
A flat rate charges interest on the whole amount you borrowed, for the whole term, no matter how much of it you have already paid back. Borrow $10,000 at 6% flat over three yearsand the interest is worked out once, on day one: $10,000 × 6% × 3 years = $1,800. You repay $11,800 in 36 equal instalments of $327.78.
The loan this calculator prices works the other way. Interest is charged each month on what you still owe, and what you still owe keeps shrinking. The same $10,000 at a genuine 6% over three years costs $951.88 in interest, and the payment is $304.22. Two loans advertising the same 6% differ by $848 — the flat one costs almost twice as much.
So a flat rate is not comparable to a rate quoted any other way. To cost what that 6% flat loan costs, a reducing-balance loan would have to charge about 11.1%. That is the number to put next to other offers:
| Flat rate | Monthly payment | Total interest | Equivalent APR |
|---|---|---|---|
| 5% | $319.44 | $1,500.00 | 9.3% |
| 6% | $327.78 | $1,800.00 | 11.1% |
| 8% | $344.44 | $2,400.00 | 14.5% |
| 10% | $361.11 | $3,000.00 | 17.9% |
The equivalent is a little under double the flat rate in every row, and that holds at other amounts and terms too, because it depends on the shape of the loan rather than its size. Doubling the flat rate is a fair rough check when someone quotes you one.
Do not type a flat rate into the calculator above. It prices interest on the balance you still owe, so a flat rate entered there produces a payment lower than the one you would actually be asked for. Work out the total repayable instead — amount, plus amount × rate × years — and divide by the number of months.
US lenders more often call this precomputed interest. The CFPB describes it as the total interest being calculated immediately and split equally across the payments, rather than charged on the outstanding balance. It matters for more than the price: on a precomputed loan the CFPB says making extra payments does not reduce the principal or the interest owed, so the section above about overpaying does not apply to one.
Where this calculator stops
It prices fixed-rate loans with equal monthly payments. It does not model a variable rate, a credit card, an interest-only period, or the flat-rate loan described above. It also leaves out late fees and insurance sold alongside the loan. If you are buying a home, taxes, insurance and PMI change the picture enough that you want a mortgage calculator instead.
Educational estimates only. LoanCalcFast is not a lender and does not give financial advice. Last reviewed August 20, 2026. See our about page for who writes this and terms for the fine print.