Loan Interest Calculator

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This loan interest calculator allows you to simulate monthly payments and total cost of your loan. Whether you're considering a mortgage, auto loan, or any other type of borrowing, our tool accurately calculates your monthly payments, total interest amount, and overall loan cost. Ideal for comparing different bank offers and making an informed financial decision.

Simply enter the borrowed amount, annual interest rate, and duration in months, and instantly get all the details of your financing. Plan your budget and negotiate with full knowledge!

Enter the amount you wish to borrow, the proposed annual interest rate, and the repayment duration in months. The tool automatically calculates your monthly payment and the total loan cost.

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Calculate loan interest and monthly payments
Enter your loan characteristics to calculate monthly payments and know the total borrowing cost, interest included.

Understanding Loan Interest Calculation

Loan interest calculation is based on a precise mathematical formula that takes into account three essential elements: the borrowed amount (principal), the annual interest rate, and the repayment duration. This calculation method ensures constant monthly payments throughout the loan term.

Monthly Payment Calculation Formula

The formula used to calculate monthly payments for a compound interest loan is:

M = P × [r × (1 + r)ⁿ] / [(1 + r)ⁿ - 1]
  • M = Monthly payment
  • P = Principal (borrowed amount)
  • r = Monthly interest rate (annual rate ÷ 12)
  • n = Total number of monthly payments

Compound Interest Principle

In a standard loan, interest is calculated on the remaining principal. This means that:

Practical Calculation Example

Mortgage Loan of $200,000

  • Amount: $200,000
  • Rate: 3.5% per year
  • Term: 20 years (240 months)
Monthly rate calculation:

r = 3.5% ÷ 12 = 0.292% = 0.00292

Formula application:

M = 200,000 × [0.00292 × (1.00292)²⁴⁰] / [(1.00292)²⁴⁰ - 1]

Monthly payment ≈ $1,160

Total cost:
  • Total repaid: $1,160 × 240 = $278,400
  • Total interest: $278,400 - $200,000 = $78,400

Factors Affecting Loan Cost

Interest Rate Impact

A variation in interest rate has a considerable impact on the total loan cost:

Annual Rate Monthly Payment ($200k, 20 years) Total Interest Cost
2.5% $1,060 $54,400
3.5% $1,160 $78,400
4.5% $1,266 $103,840

Loan Term Impact

Extending the term reduces monthly payments but increases total cost:

Term Monthly Payment ($200k, 3.5%) Total Interest Cost
15 years $1,430 $57,400
20 years $1,160 $78,400
25 years $1,001 $100,300

Types of Loans

Fixed-Rate Loan

The rate remains the same throughout the loan term. Monthly payments are constant and predictable. Advantage: security and predictability. Disadvantage: no benefit if rates drop.

Variable-Rate Loan

The rate varies according to a reference index. Monthly payments can fluctuate. Advantage: initial rate often lower. Disadvantage: uncertainty about evolution.

Tips to Optimize Your Loan

Simulate Before Committing

Our calculator allows you to compare different scenarios and make an informed decision. Don't hesitate to test several combinations of amount, rate, and term to find the solution that best fits your financial situation.

Remember: A loan is a long-term commitment. Take time to understand the financial mechanisms and don't hesitate to consult a banking advisor for personalized advice.
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