Understanding your loan
Most personal loans, car loans and mortgages are amortising: you pay the same amount each month, and each payment covers that month's interest plus a slice of the loan itself. Because interest is charged on the remaining balance, the interest part shrinks over time and the principal part grows.
The formula
Monthly payment = P × r × (1 + r)ⁿ ÷ ((1 + r)ⁿ − 1)
- P: the amount borrowed
- r: the monthly rate (annual rate ÷ 12 ÷ 100)
- n: the number of monthly payments
Payments are rounded to the cent, and the final payment absorbs any rounding so the balance ends at exactly zero. The schedule shows this.
Compare before you borrow
Try different terms and rates: on a 10,000 loan at 12%, three years costs about 1,960 in interest, while five years costs about 3,350, even though the monthly payment is lower. Seeing the total interest helps you choose.
Saving instead of borrowing? See how money grows with the compound interest calculator, or work out a rate change with the percentage calculator.