How it’s worked out
A fixed-rate loan is repaid in equal monthly payments. Each month a twelfth of the yearly rate is charged on what you still owe and the rest of the payment reduces the loan:
Payment = P × i ÷ (1 − (1 + i)^−n)
For example, 10,000 at 5% over 3 years is 299.71 a month: the textbook figure. Payments are rounded to the penny and the last one clears what’s left.
10,000 at 7.9% APR
Worked out by this calculator:
| Term | Monthly payment | Total interest | Total repaid |
|---|---|---|---|
| 2 years | 451.82 | 843.57 | 10,843.57 |
| 3 years | 312.90 | 1,264.49 | 11,264.49 |
| 4 years | 243.66 | 1,695.63 | 11,695.63 |
| 5 years | 202.29 | 2,137.05 | 12,137.05 |
| 7 years | 155.36 | 3,050.77 | 13,050.77 |
Spreading a loan over more years lowers the payment but adds interest. Paying a little extra each month, where the lender allows it, does the opposite.
APR and the rate on the balance
The APR (annual percentage rate) includes the interest and any compulsory fees, spread over the term, so loans can be compared fairly. If a loan has an arrangement fee, the rate charged on the balance is a little lower than the APR; working from the APR then slightly overstates the payment, which is the safe side.
How to read the result
- Monthly payment: the same every month; on 10,000 at 7.9% over 5 years it is 202.29.
- Total interest and total repaid: the true cost of the loan.
- Paid off: the month of the last payment, and how much sooner with an extra amount.
Common mistakes
- Choosing the longest term for the lowest payment without looking at the total interest.
- Leaving fees out when comparing: compare APRs, which include them.
- Forgetting early repayment charges when planning to pay extra.
How to use it
- Type the amount you want to borrow.
- Type the APR from the loan offer and the term in years (and months, if it isn’t a whole number of years).
- Read the monthly payment and total interest; open the schedule to see each payment.
Questions
How much is a 10,000 loan a month?
It depends on the rate and term: at 7.9% APR it is 312.90 a month over 3 years or 202.29 over 5 years.
Is a longer loan cheaper?
The monthly payment is lower but the total cost is higher, because interest is charged for longer. The calculator shows both so you can choose.
Can I see how much I save by paying extra?
Yes. Type an extra monthly amount and the calculator shows the interest saved and how much sooner the loan ends.
More calculators
Elsewhere on Yuzool
- Loan calculator spreadsheet in Gridwork
- Budget to fit the payment into your month
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