Payment Calculator

One loan, two questions

A loan is a contract between a borrower and a lender: money up front, repaid later with interest. Of everything in that contract, the two numbers borrowers actually negotiate are how long it runs and what it costs each month — and the two tabs above exist because those numbers trade against each other. Fix the term and the payment is determined. Fix the payment and the term is determined. Everything else is arithmetic.

Fixed term: choosing the deadline

Most big loans are written this way. Mortgages are the classic case: the choice between a 30-year and a 15-year term is a long-term financial decision, not a clerical one. The defaults above show the 15-year version of a $200,000 loan at 6% — $1,687.71 a month and $103,788.46 of interest. Stretch the same loan to 30 years in the Loan Calculator and the payment drops to $1,199.10 while the interest climbs to $231,676.38. People pick the shorter term when they value certainty and a lower rate and have savings to absorb the bigger payment; they pick the longer one to keep monthly obligations low, sometimes timing the payoff to coincide with retirement income. Auto loans run the same trade-off over 12 to 96 months, where the longest term with the smallest payment almost always ends up the most expensive way to buy the car.

Fixed payments: choosing the budget

The other tab answers the question debtors actually ask: if I pay this much a month, when is it gone? It is the natural tool for credit-card debt and for anyone with a fixed monthly surplus — and adding spare cash to the "Monthly Pay" field shows exactly how much sooner the loan dies. There is one hard limit, and the calculator enforces it honestly: if the payment does not cover the first month's interest (the loan amount times the monthly rate), the balance can never fall. At exactly that amount the debt is permanent; below it, the balance grows every month despite the payments — negative amortization, the trap behind minimum-payment credit cards. Lower the amount, raise the payment, or find a lower rate; one of the three has to move.

Interest rate vs. APR

The rate field deserves one distinction. The interest rate is just the cost of borrowing the principal. The APR is the broader measure: it prorates broker fees, discount points, closing costs and administrative charges across the life of the loan into a single annual figure. A loan with no fees has an APR equal to its rate; a loan with heavy upfront costs can have an APR noticeably above it — on large loans, a difference worth thousands. Run this calculator at the interest rate to see the loan's mechanics, then at the APR to see its true total cost. The advertised APR is usually the more honest input.

Fixed vs. variable rates

This calculator assumes a fixed rate — the rate most conventional mortgages, auto loans and student loans carry for their whole life. Variable (adjustable or floating) rates move with an index such as the Federal Reserve's key rate: payments change as the index changes, sometimes under a lender's cap, and usually only at agreed review intervals. Falling index rates favor variable borrowers; rising ones favor fixed. Variable structures live in adjustable-rate mortgages, HELOCs and some personal and student loans — and credit cards, whose issuers need give no advance notice of a variable-rate increase. A fixed-rate calculation like this one is the baseline every variable offer should be compared against.

Frequently asked questions

Which tab should I use?

Fixed Term when you know how long the loan should last (comparing mortgage or auto-loan offers). Fixed Payments when you know what you can pay each month (credit cards, extra-payment plans).

Why 6.98 months — a fraction?

The exact payoff for $2,000 a month on $200,000 at 6% is 138.98 months: 138 full payments and a smaller final one of about $1,951.56. The schedule shows the real month-by-month version.

My payment "cannot pay off this loan" — what now?

It does not exceed the first month's interest ($1,000 on the default loan). Raise the payment above that line, borrow less, or find a lower rate.

Rate or APR?

Rate for the mechanics, APR for the true cost including fees. They are identical only when the loan has no fees.