How the monthly payment is calculated
US lenders apply the yearly interest rate monthly, at one twelfth of the rate. Under Regulation Z the APR is a nominal rate too: the rate for each payment period multiplied by the number of periods in a year (Appendix J). So 11% a year is 0.9167% a month.
The calculator sets equal monthly payments that cover each month's interest and pay off the loan by the end of the term. Early payments are mostly interest; later ones mostly repay the amount borrowed.
Worked example
A $15,000 loan at 11% for 4 years (48 payments) costs $387.68 a month. The total of payments is $18,608.78, so the finance charge is $3,608.78. With no origination fee, the APR is the same as the interest rate, 11%.
How an origination fee changes the APR
Many lenders take an origination fee out of the loan before you receive the money. You still repay the full loan amount, so the fee doesn't change the monthly payment, but you receive less cash. Regulation Z counts loan fees as part of the finance charge (§1026.4) and subtracts them to get the amount financed (§1026.18).
For example, a $10,000 loan at 10% for 3 years with a 5% fee costs $322.67 a month. The $500 fee is deducted, so the amount financed is $9,500. The finance charge is $2,116.19: $1,616.19 of interest plus the $500 fee. The APR, the rate at which the 36 payments are worth exactly $9,500, is 13.56%.
Compare offers by their APR rather than the interest rate alone. A lower rate with a large fee can cost more than a higher rate with no fee.
Reading a Truth in Lending disclosure
Before you sign, a US lender must disclose the APR (the cost of your credit as a yearly rate), the finance charge (the dollar amount the credit will cost you), the amount financed (the credit provided to you or on your behalf) and the total of payments (what you'll have paid after all scheduled payments). The calculator shows the same four figures so you can check an offer.
Regulation Z treats a disclosed APR as accurate if it is within 1/8 of a percentage point of the exact rate (§1026.22). This calculator shows the APR to two decimal places.
What this calculator assumes
The rate is fixed for the whole term and you make equal monthly payments. The origination fee is deducted from the loan proceeds. Interest is charged monthly at one twelfth of the rate; lenders that charge daily interest can differ by a few cents.
Whether you can pay off the loan early without a penalty depends on your loan contract and state law. Late fees, credit insurance and other optional products aren't included, and the calculator doesn't check whether a lender would approve the loan.
Borrowing in the UK?
The country choices above the inputs open separate local pages. UK lenders quote the APR as an effective annual rate, so the same numbers give a slightly lower repayment there. Choosing United Kingdom opens the UK page and resets the inputs; amounts are not converted.
For a loan from a UK lender, use the UK loan calculator with its GBP amounts and early settlement estimate.
Inputs for the US loan payment calculator
Amount to borrow
The loan amount in US dollars, before any origination fee is deducted.
Interest rate
The yearly interest rate (note rate) from your loan offer. The rate shown is only an example. If your offer has no fees, this is the same as the APR.
Term
How many years you'll repay the loan over. Part-years are fine if they come to whole months, such as 2.5 years for 30 payments.
First payment date
When your first monthly payment is due. The calculator puts the rest on the same day each month, moving to the last day of shorter months, to find your final payment date.
Origination fee
The lender's fee as a percentage of the loan amount, deducted from the money you receive. Enter 0 if there is no fee.
CALCULATOR QUESTIONS
US loan payment calculator questions
How is a monthly loan payment calculated?
The yearly interest rate is divided by 12 to get a monthly rate, and the payment is set so that equal monthly payments cover the interest and pay off the loan by the end of the term.
What's the difference between the interest rate and the APR?
The interest rate sets your payment. The APR also counts fees such as an origination fee, spread over the term, so it shows the full yearly cost of the loan. With no fees, the two are the same.
Does an origination fee change my monthly payment?
Not when it's deducted from the loan proceeds: you repay the full loan amount either way. You receive less money, so the APR and the finance charge go up.
Does a longer loan cost more?
Usually, yes. A longer term lowers each payment, but you pay interest for longer, so the finance charge rises.
Can I pay off a personal loan early?
Often, but it depends on your loan contract and state law. Some loans charge a prepayment penalty, so check your agreement before paying extra.