What is a Loan Interest Calculator?
The loan interest calculator computes your monthly payment and total interest from the loan principal, annual interest rate, and repayment period. It compares equal-payment, equal-principal, and interest-only repayment methods.
How it's calculated
Equal-payment keeps the monthly payment constant by rebalancing principal and interest each month. Equal-principal divides the principal evenly and adds interest on the remaining balance. Interest is calculated as annual rate divided by 12, compounded monthly.
Worked example
Example: Borrowing $30,000 at 5% annual interest, equal-payment, 3-year term
- Monthly payment ≈ $899
- Total repaid ≈ $32,381
- Total interest ≈ $2,381
Good to know
- Total interest is lower with equal-principal repayment, even at the same rate and term, because the balance shrinks faster early on. The trade-off is a larger first payment.
- Borrowing $30,000 at 5% for 3 years costs about $2,370 in interest. Stretch it to 5 years and interest rises to about $3,970 — 1.7x more. Lowering monthly payments by extending the term always increases total cost.
- The advertised rate and your real rate can differ. Loan origination fees, stamp duty, and prepayment penalties all add to the real cost.
- A grace period means you only pay interest for a while — convenient short-term, but the principal never shrinks, so payments jump once it ends.
- Prepayment penalties are usually waived after 3 years. Worth remembering if you plan to pay off early.
Frequently asked questions
Q. Which is better, equal-payment or equal-principal?
Equal-principal has lower total interest, but larger early payments. It suits borrowers with stable income and room in their early budget.
Q. How much more do I pay if the rate rises 1%?
On a $100,000 loan over 30 years with equal payments, a 1 percentage point rise typically adds roughly $50 to $60 to the monthly payment. Longer terms amplify the effect.
Q. Fixed or variable rate — which should I choose?
Variable rates are better if rates are expected to fall, fixed if they are expected to rise. Since forecasts are unreliable, many choose variable for short terms and fixed for long ones.