Loan Interest Calculator
Calculate the total interest on a loan, how it splits across each year, and how the loan term changes what you pay
By Waqar Mushtaq · Last updated:
How much will this loan actually cost me? This loan interest calculator answers that for any fixed-rate loan with monthly payments -- a personal loan, auto loan, student loan, or mortgage. Enter the amount, interest rate, and term to get the total interest you'll pay, your monthly payment, and how much of every dollar you repay goes to interest. A year-by-year chart shows how interest dominates the early payments and shrinks over time, and a comparison table shows the same loan at shorter and longer terms -- usually the biggest single lever on total interest after the rate itself.
How Loan Interest Is Calculated
O(n) in the number of paymentsM = monthly payment · P = loan amount · r = annual rate ÷ 12 · n = number of monthly payments
I_k = interest in month k · B_{k-1} = balance after the previous payment
Most installment loans are amortizing: you pay the same amount every month, and each payment first covers that month's interest on the remaining balance, with the rest reducing the principal. Because the balance is highest at the start, early payments are mostly interest; as the balance falls, so does each month's interest charge.
Example: $20,000 at 7% for 5 years (60 months).
- Monthly rate: 7% ÷ 12 = 0.5833%
- Monthly payment: $396.02
- First month's interest: $20,000 × 0.005833 = $116.67 -- so only $279.35 of the first payment reduces the balance
- Last month's interest: just $2.30
- Total interest over 5 years: $3,761.48, about 15.8% of everything you pay
The calculator builds the full month-by-month schedule with interest rounded to the cent each month and the final payment adjusted to clear the exact remaining balance, so the total matches what a lender would actually charge rather than the rough M × n − P shortcut (which here gives $3,761.20).
At a 0% rate there's no interest and the payment is simply the loan amount divided by the number of payments. This calculator assumes interest is charged monthly on the declining balance; it doesn't model add-on (precomputed) interest, fees, or extra payments. If you know the payment but not the rate, use the Interest Rate Calculator; for the full month-by-month table, see the Amortization Calculator.
Use Cases
Comparing Loan Offers
Two offers with different rates and terms are hard to compare by monthly payment alone. Total interest puts them on the same scale: what each loan costs over its life.
Choosing a Loan Term
The term comparison table shows the trade-off directly: a 7-year auto loan has a smaller payment than a 4-year one but can cost hundreds or thousands more in interest at the same rate.
Budgeting for a Car, Renovation, or Debt Consolidation
Before borrowing, see the monthly payment you'll commit to and the full cost of the loan, so you can decide whether to borrow less, save longer, or shop for a lower rate.
Understanding Where Your Payments Go
The yearly chart shows why paying extra early in a loan saves so much: that's when the balance -- and therefore the interest charge -- is largest.
Frequently Asked Questions
How do I calculate the total interest on a loan?
Work out the monthly payment from the loan amount, monthly rate, and number of payments, then add up the interest charged each month on the remaining balance. A quick approximation is monthly payment × number of payments − loan amount. For $20,000 at 7% over 60 months, that's about $3,761.
Why is most of my early payment going to interest?
Interest each month is charged on the balance you still owe. At the start of the loan that balance is at its highest, so the interest portion is largest. As you pay down principal, the interest portion shrinks and more of each payment reduces the balance.
Does a longer loan term cost more?
Yes, at the same interest rate. A longer term spreads the principal over more payments, lowering each payment, but you owe the money for longer, so more interest accumulates. Longer-term loans also often carry higher rates, which widens the gap further.
Is the interest rate the same as the APR?
Not necessarily. The interest rate is the cost of borrowing the principal; the APR also includes certain lender fees, so it's usually higher. This calculator uses the interest rate. If your loan has origination fees, the APR calculator shows the true annual cost.
How can I pay less interest on a loan?
Borrow less, choose a shorter term, get a lower rate (by improving your credit or shopping lenders), or make extra payments toward principal -- especially early in the loan, when the balance and interest charges are highest. Check that your loan has no prepayment penalty first.
Methodology
The formula above is implemented as a standalone module covered by unit tests, so its worked examples are re-checked on every change to the site. It is verified against the authoritative sources listed below.
Not financial advice. This calculator is a general informational tool and cannot account for your individual circumstances. See the terms of use.
Maintained by Waqar Mushtaq. Spotted a result that looks wrong? Report it and it becomes a failing test.