Our loan calculator helps you compute monthly payments, total interest, and detailed repayment schedules for mortgages, auto loans, personal loans, and more. Compare equal payment (amortization) and equal principal methods side by side to understand how different repayment strategies affect your total cost. Whether you are planning to buy a home, finance a car, or consolidate debt, this free calculator provides the insights you need to make informed financial decisions. Simply enter your loan amount, interest rate, and term to see instant results with a complete month-by-month breakdown.
Understanding Loan Repayment Methods
There are two primary repayment methods: Equal Payment (Amortization) and Equal Principal. With Equal Payment, your monthly payment stays the same throughout the loan term, but the proportion of principal versus interest changes over time - early payments are mostly interest, while later payments are mostly principal. With Equal Principal, you pay the same amount of principal each month plus decreasing interest, resulting in higher initial payments that gradually decrease. Equal Principal typically results in 10-20% less total interest paid, but requires higher payments at the start.
Key Factors Affecting Loan Cost
- Principal Amount: The larger your loan, the more total interest you will pay over time
- Loan Term: Longer terms mean lower monthly payments but significantly higher total interest
- Interest Rate: Even a 0.1% difference compounds significantly over a 30-year mortgage
- Repayment Method: Equal Principal saves 10-20% on total interest compared to Equal Payment
- Extra Payments: Making additional principal payments can dramatically reduce total interest
How to Read Your Results
Monthly Payment shows the amount due each month (principal + interest). Total Payment is the sum of all payments over the loan term. Total Interest is the total payment minus the original principal - this is your true borrowing cost. The Payment Schedule provides a detailed month-by-month breakdown showing how much of each payment goes to principal versus interest, and your remaining balance after each payment.
Smart Borrowing Tips
- Keep your monthly payment below 30-40% of your income for financial stability
- Compare rates from multiple lenders - even small rate differences matter over long terms
- Consider making bi-weekly payments to save on interest and pay off early
- Check for prepayment penalties before making extra payments
- Build an emergency fund before aggressively paying down low-interest debt
FAQ
Q: Should I pay off my loan early?
A: Paying off loans early is generally beneficial if done during the first half of the loan term when interest comprises a larger portion of your payment. However, consider whether there are prepayment penalties and if your money could earn higher returns elsewhere. For zero-interest financing, there is usually no benefit to early repayment.
Q: Which repayment method should I choose?
A: Equal Payment is better if you prefer predictable budgeting and have limited income flexibility. Equal Principal is better if you can handle higher initial payments and want to minimize total interest paid. Over a 30-year mortgage, Equal Principal can save tens of thousands in interest.
Q: How much house can I afford?
A: Financial experts recommend keeping your monthly mortgage payment (including taxes and insurance) below 28% of your gross monthly income, and total debt payments below 36%. Use our calculator to find a loan amount that fits within these guidelines while leaving room for other financial goals.
Q: What is the difference between APR and interest rate?
A: The interest rate is the base cost of borrowing money. APR (Annual Percentage Rate) includes the interest rate plus other fees like origination fees, closing costs, and points. APR gives a more complete picture of the true cost of a loan and is better for comparing offers from different lenders.