# Loan calculator

Work out loan payments and what extra payments save

Use it at https://www.quicktoolz.com/tools/loan-calculator. From QuickToolz.

A loan payment depends on the amount, the interest rate and the term. For $25,000 at 7% over 5 years, the payment is about $495 a month. Paying extra each month cuts both the time and the total interest. Add an extra payment under More options to see how much.

## How it works

payment = P × r × (1 + r)ⁿ ÷ ((1 + r)ⁿ − 1)

Each month, interest is charged on the balance. The rest of your payment reduces that balance, so the interest share shrinks over time.

An extra payment goes straight to the balance, which is why it saves more than it costs.

Worked example: For $25,000 at 7% a year for 5 years, the monthly rate r is 7 ÷ 12 ÷ 100 and n is 60. The payment is $495.03.

## Examples

| Loan | Rate | Term | Monthly payment |
| --- | --- | --- | --- |
| $10,000.00 | 6% | 3 years | $304.22 |
| $25,000.00 | 7% | 5 years | $495.03 |
| $50,000.00 | 8% | 7 years | $779.31 |

## What this tool doesn't cover

- This assumes a fixed rate and no fees.
- Some loans charge a fee for paying early. Check yours.
- This is an estimate, not financial advice.

## Questions

### How much does an extra payment save?

Enter it under More options. We show the time and interest it saves.

### What if I enter a 0% rate?

The payment is simply the loan divided by the number of months.

### Which currencies can I use?

You can choose US dollars, euros, pounds or rupees. The maths is the same.

### What is the difference between flat and reducing rates?

A flat rate charges interest on the whole loan for the full term. A reducing rate charges it only on what you still owe, so it costs less at the same rate.

### How do I lower the total interest on a loan?

Borrow less, choose a shorter term, or make extra payments early. Early payments save the most, because they cut the balance that earns interest.

## Sources

- [Reserve Bank of India](https://www.rbi.org.in)
- [SEBI investor education](https://investor.sebi.gov.in)