Loan Calculator

Loans come in three shapes depending on when the money goes back, and this page has a calculator for each. The first handles ordinary loans repaid in regular instalments. The second handles loans where nothing is due until the end. The third prices a bond, where the amount repaid is fixed in advance and you receive less than that today.

Amortized loan: a fixed amount paid periodically

Most consumer borrowing works this way. Payments are level and spread evenly across the term, each one covering the interest that has accrued and putting the rest against the balance, until the loan reaches maturity and the balance is zero. Mortgages, car loans, student loans, and personal loans are all amortized, and when someone says "loan" in ordinary conversation this is almost always what they mean.

On the defaults, $100,000 over 10 years at 6% compounded monthly comes to $1,110.21 a month. You repay $133,224.60 in total, so $33,224.60 is interest, a third of what you borrowed on top of what you borrowed.

The amortization table underneath shows something the payment figure hides: the split between interest and principal changes every period. Early payments are mostly interest because the balance is at its largest, and late payments are almost entirely principal. That is why overpaying early saves so much more than overpaying late, and why selling a house after five years of a thirty-year mortgage leaves the balance much higher than people expect.

For a specific type of borrowing, a dedicated tool fits better than this one: Mortgage, Auto Loan, Student Loan, FHA Loan, VA Mortgage, Business Loan, and Personal Loan.

Deferred payment loan: one lump sum at maturity

Here nothing is paid until the end, and interest compounds on the whole balance the entire time. Many commercial and short-term loans work this way. The same $100,000 at 6% for 10 years grows to $179,084.77, so the interest is $79,084.77 rather than the $33,224.60 on the amortized version. Identical rate, identical term, more than twice the interest, purely because nothing was being repaid along the way.

That comparison is the clearest illustration of what regular payments actually do. Every instalment reduces the base that interest is charged on, and a deferred loan never gets that benefit. Balloon loans sit between the two, with small regular payments and a large final one; this calculator handles the pure case where a single payment settles everything.

Bond: a predetermined amount at maturity

This structure is rare outside bonds. Rather than borrowing a sum and repaying it with interest, the borrower promises a fixed payment at maturity and receives less than that today. The face value, or par value, is what the issuer pays when the bond matures, assuming no default.

Two types are common. A coupon bond pays interest at set intervals, usually annually or semi-annually, calculated as a percentage of face value. A zero-coupon bond pays nothing along the way; it is sold at a deep discount and redeemed at face value, with the gap standing in for all the interest. This calculator prices the zero-coupon case: promise $100,000 in 10 years at 6% and you receive $55,839.48 now, a 44% discount to face.

Once issued, a bond's market price moves with interest rates and conditions, and it can trade above or below what you paid. None of that changes what is due at maturity. Our Bond Calculator handles coupon bonds and yields.

Interest rate

Interest is what the lender earns, expressed as a percentage of the amount borrowed and paid on top of repaying the principal. Loans are usually quoted as an APR, the annual percentage rate, which folds in fees as well as interest, so it is a truer measure of cost than the headline rate alone. Deposit products are quoted as APY, the annual percentage yield, which reflects compounding. Comparing an APR against an APY is not comparing like with like.

Two loans can share a rate and cost differently once fees are counted. An origination fee of 1% to 8% is common on personal loans, sometimes deducted from the money you receive rather than added to the balance, which raises the effective cost. Always compare the APR figure lenders are required to disclose. Our APR Calculator works out the real rate once fees are included, and the Interest Calculator covers the underlying arithmetic.

Compounding frequency

Compound interest is interest charged on the accumulated interest as well as the original principal. The more often compounding happens, the more the loan costs at the same nominal rate, which is why the Compound field on each calculator changes the answer. Most loans compound monthly. Try switching the first calculator from monthly to daily and watch the payment move. The Compound Interest Calculator compares frequencies directly.

Loan term

The term is how long the loan runs assuming the minimum payments are made. It pulls in two directions at once. A longer term makes each payment smaller and the total cost larger, because interest accrues for longer on a balance that falls more slowly. Stretching a car loan from four years to seven cuts the monthly figure noticeably and adds thousands to what you eventually hand over. Deciding the term is really deciding between monthly affordability and lifetime cost, and it is worth running both through the calculator rather than accepting the one a salesperson leads with.

Two term-related details are worth checking in the paperwork. Some loans carry a prepayment penalty, which charges you for clearing the balance early and can wipe out the saving from overpaying. And most loans accrue simple interest on the outstanding balance, so paying early genuinely reduces what you owe; a precomputed-interest loan fixes the total interest at the start, so early payoff saves far less.

Secured and unsecured loans

Consumer loans divide into two kinds, and the difference decides both the rate you are offered and what happens if you cannot pay.

A secured loan is backed by an asset pledged as collateral. The lender takes a lien, a right over the property until the debt is settled, so defaulting gives them the legal route to seize it. Mortgages and auto loans are the common examples: the lender effectively holds the deed or title until the loan is cleared, and default means foreclosure or repossession. If the asset sells for less than the outstanding balance, you can still owe the shortfall.

Because the lender's risk is lower, secured loans are easier to be approved for, carry lower rates, and allow larger amounts. They are often the realistic option for someone who would not qualify for an unsecured loan at all. The cost of that is real: the asset is genuinely at risk.

An unsecured loan has no collateral behind it, so the lender has to judge you instead. The usual framework is the five C's of credit:

• Character: credit history and reports showing whether past obligations were met, plus work history and income.
• Capacity: the ability to repay, usually measured by comparing debt to income.
• Capital: other assets beyond income, such as savings, investments, or a down payment.
• Collateral: applies to secured lending only, being the asset pledged against default.
• Conditions: the state of the lending market, the industry, and what the money is for.

Unsecured loans carry higher rates, lower limits, and shorter terms, and a lender may require a co-signer, someone who becomes liable if you do not pay. Missing payments does not put a specific asset at risk, but the lender can pass the debt to a collection agency, and the damage to your credit file affects everything you borrow afterwards. Credit cards, personal loans, and student loans are the familiar examples; see our Credit Card, Personal Loan, and Student Loan calculators.