Free online loan calculator to find monthly payments, total interest cost, and complete amortization schedule for amortized loans, deferred payment loans, and bonds. All calculations run instantly in your browser.
Use this calculator for mortgages, auto loans, student loans, personal loans, or any loan with regular fixed payments spread over the loan term.
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Many consumer loans fall into this category. Routine payments are made on both principal and interest until the loan reaches maturity (is entirely paid off). Some of the most familiar amortized loans include mortgages, car loans, student loans, and personal loans. The word "loan" will probably refer to this type in everyday conversation.
The formula for calculating the periodic payment is:
P = A × [ r(1+r)n ] / [ (1+r)n − 1 ]
Where: P = periodic payment, A = loan amount, r = periodic interest rate, n = number of periods
Many commercial loans or short-term loans are in this category. Unlike amortized loans, these loans have a single, large lump sum due at maturity. Some loans, such as balloon loans, can also have smaller routine payments during their lifetimes, but this calculation only works for loans with a single payment of all principal and interest due at maturity.
M = A × (1 + r/n)n×t
This kind of loan is rarely made except in the form of bonds. Technically, bonds operate differently from more conventional loans in that borrowers make a predetermined payment at maturity. The face, or par value of a bond, is the amount paid by the issuer (borrower) when the bond matures, assuming the borrower doesn't default.
Two common bond types are coupon and zero-coupon bonds. With coupon bonds, lenders base coupon interest payments on a percentage of the face value. Zero-coupon bonds do not pay interest directly. Instead, borrowers sell bonds at a deep discount to their face value, then pay the face value when the bond matures. This calculator runs calculations for zero-coupon bonds.
Nearly all loan structures include interest, which is the profit that banks or lenders make on loans. Interest rate is the percentage of a loan paid by borrowers to lenders. For most loans, interest is paid in addition to principal repayment. Loan interest is usually expressed in APR, or annual percentage rate, which includes both interest and fees. The rate usually published by banks for saving accounts, money market accounts, and CDs is the annual percentage yield, or APY. It is important to understand the difference between APR and APY.
Compound interest is interest that is earned not only on the initial principal but also on accumulated interest from previous periods. Generally, the more frequently compounding occurs, the higher the total amount due on the loan. In most loans, compounding occurs monthly.
A loan term is the duration of the loan, given that required minimum payments are made each month. The term of the loan can affect the structure of the loan in many ways. Generally, the longer the term, the more interest will be accrued over time, raising the total cost of the loan for borrowers, but reducing the periodic payments.
A secured loan means that the borrower has put up some asset as a form of collateral before being granted a loan. The lender is issued a lien, which is a right to possession of property belonging to another person until a debt is paid. In other words, defaulting on a secured loan will give the loan issuer the legal ability to seize the asset that was put up as collateral. The most common secured loans are mortgages and auto loans.
Lenders are generally hesitant to lend large amounts of money with no guarantee. Secured loans reduce the risk of the borrower defaulting since they risk losing whatever asset they put up as collateral. If the collateral is worth less than the outstanding debt, the borrower can still be liable for the remainder.
An unsecured loan is an agreement to pay a loan back without collateral. Because there is no collateral involved, lenders need a way to verify the financial integrity of their borrowers. This can be achieved through the five C's of credit:
Unsecured loans generally feature higher interest rates, lower borrowing limits, and shorter repayment terms than secured loans. Lenders may sometimes require a co-signer for unsecured loans if the lender deems the borrower as risky. Examples include credit cards, personal loans, and student loans.