Loan Calculator

Loan calculator: a complete guide

Whether you call it a loan calculator, an EMI calculator, or a monthly payment calculator, the underlying math is identical: given a principal, an interest rate, and a term, what does the fixed monthly instalment work out to? Our calculator handles any fixed-rate amortising loan — car, personal, student, business, education, or wedding loans — and runs the formula instantly in your browser.

The EMI / monthly payment formula

Reducing-balance amortisation uses the same equation worldwide:

EMI = P × r × (1 + r)^n / ((1 + r)^n − 1)

Where:
P = loan principal
r = monthly interest rate (annual rate ÷ 12)
n = number of monthly instalments (years × 12)

Example: a $20,000 car loan at 8% for 5 years. r = 0.006667, n = 60. EMI works out to $405.53. Over 60 months you pay $24,332 — $4,332 of which is interest.

Flat rate vs reducing balance — the trick that costs you money

This is the single biggest source of confusion in personal lending. A quoted flat rate of 8% can be equivalent to a 14–15% reducing-balance rate. Always confirm which method the lender uses, and convert to the effective annual rate to compare offers honestly.

• Reducing balance: interest is calculated each month on the outstanding principal. Because the principal falls every month, the interest portion of each payment falls too. Most mortgages, modern car loans, and reputable personal loans use this method.
• Flat rate: interest is calculated up front on the original principal, then distributed evenly across all instalments. Used by some second-tier consumer lenders, car dealerships in certain markets, and Buy Now Pay Later programmes. The quoted rate looks low but the effective annual rate is roughly 1.8–1.9× higher.

Total cost matters more than monthly payment

Lenders compete on the monthly payment because it is the easiest number to understand. But a low monthly payment hides the total cost. A $15,000 loan at 9% over 3 years costs $2,167 in interest; the same loan stretched to 7 years costs $5,167 in interest — almost 2.4× as much for an extra 4 years of borrowing.

Before you sign, always look at three numbers together: monthly payment, total interest, and total cost. The calculator above shows all three so you can compare apples to apples.

Typical interest rates by loan type (2026)

• Mortgage (US, 30-year fixed): 6.0%–7.5% depending on credit and points.
• Auto loan (new car, 60-month): 6.5%–9% for prime borrowers; 12–18% for subprime.
• Personal loan (unsecured): 7%–25% depending on credit score and lender.
• Student loan (US federal): 5.5%–8.05% for current academic year.
• Credit card: 18%–29% — never carry a balance you can refinance into a personal loan.

Should you take a longer or shorter loan?

The trade-off is identical to mortgages: longer term = lower monthly payment but more total interest. The discipline is to take the shortest term whose monthly payment fits comfortably inside your budget — "comfortably" meaning you still have room to save 15% of income for retirement and maintain a 3–6 month emergency fund. If a 3-year auto loan blows up your budget but a 5-year doesn't, the right answer might be a cheaper car, not a longer loan.

Prepayment: when it makes sense

Most modern loans let you pay extra principal at any time without penalty. Each extra dollar of principal saves you the future interest that dollar would have accrued. On a 9% loan with 3 years remaining, an extra $1,000 payment today saves roughly $146 in interest over those 3 years — a guaranteed 4.9% annualised return, after tax, with zero risk.

Before prepaying, do two things: (1) confirm there is no prepayment penalty, and (2) make sure you have an emergency fund. Paying down a loan ahead of building a 3-month emergency fund means a single bad month forces you to put expenses on a 22% credit card — wiping out years of savings on the original loan.

Related calculators

• Mortgage Calculator — same math, optimised for home loans with PMI / down-payment.
• Compound Interest Calculator — model what investing the difference between a shorter and longer loan would compound to.
• Percentage Calculator — quick math for APR comparisons.
• Time Card Calculator — work out gross pay from hours, lunch breaks, and overtime.