How to Use This Calculator
- 1
Enter the amount you're borrowing
This is the amount financed, not the sticker price. For a car loan, subtract your down payment and any trade-in value first; for a personal loan, it's simply the amount the lender deposits.
- 2
Type in the interest rate
Use the annual rate from your loan offer. If the lender only shows an APR, you can enter that instead — for most loans without big upfront fees, the two are close enough for planning.
- 3
Pick the loan term
Enter the repayment period in years. Auto loans commonly run 3 to 7 years, while personal loans usually range from 2 to 5. You can enter partial years like 4.5 too.
- 4
Compare a few scenarios
The results update as you type, so try a shorter term or a lower rate and watch the total interest change. A one-point rate drop on a $20,000 five-year loan saves you about $570.
How It Works
Fixed-rate loans are repaid with the amortization formula, which finds the one payment amount that covers each month's interest and still retires the entire balance by the final due date:
Here P stands for the amount borrowed, r is one-twelfth of the annual rate, and n counts the monthly payments. Early on, most of each payment goes toward interest because the balance is still large; as the balance shrinks, the interest portion falls and more of the same payment knocks out principal. The formula bakes that shifting split into a single constant number, which is why your payment never changes even though what it buys does.
Worked example
Borrow $20,000 at 7.5% for 5 years. The monthly rate is 0.075 ÷ 12 = 0.00625 and there are n = 60 payments.
Plugging in: M = 20,000 × [0.00625 × (1.00625)60] ÷ [(1.00625)60 − 1] ≈ $400.76 per month.
Sixty payments of $400.76 add up to about $24,046, so the loan costs roughly $4,046 in interest — about 20 cents for every dollar borrowed.
Frequently Asked Questions
What's the difference between APR and interest rate?
The interest rate is the bare cost of borrowing the money, while APR (annual percentage rate) folds in mandatory fees like origination charges, expressed as a yearly percentage. A personal loan advertised at 9% interest with a 3% origination fee might carry an APR near 10.3%. When comparing offers from different lenders, always compare APRs — it's the number that reflects what you'll actually pay.
What interest rate can I get with my credit score?
As of recent data, borrowers with excellent credit (740+) see new-car auto loan rates around 5–6%, while scores in the 600–659 range often pay 9–12% and subprime borrowers can pay 15% or more. Personal loans run higher across the board: roughly 8–12% for strong credit and 20%+ for fair credit. Even a 50-point score improvement before applying can shave hundreds off a five-year loan.
Does paying extra toward principal really save money?
Yes, and the effect compounds. Every extra dollar goes straight to the balance, so all future interest is charged on a smaller amount. On a $20,000 loan at 7.5% over 5 years, adding just $50 a month pays it off about 7 months early and saves roughly $550 in interest. Check that your lender applies extra payments to principal rather than counting them as early payments of future installments.
Why are auto loan rates lower than personal loan rates?
An auto loan is secured — the car itself is collateral, and the lender can repossess it if you stop paying. A personal loan is unsecured, so the lender's only recourse is collections, and it prices that risk into the rate. That's why a borrower who qualifies for a 6% car loan might be quoted 11% on an unsecured personal loan of the same size.
Should I choose a shorter or longer loan term?
A longer term buys a smaller monthly payment at the cost of more total interest. Financing $20,000 at 7.5% costs about $401 a month over 5 years with $4,046 in interest, versus about $307 a month over 7 years with roughly $5,770 in interest. Pick the shortest term whose payment fits comfortably in your budget — or take the longer term and voluntarily pay extra when you can.
What is an origination fee and can I avoid it?
An origination fee is a one-time charge — typically 1% to 8% of the loan amount — that many personal-loan lenders deduct before sending you the money. Borrow $10,000 with a 5% fee and only $9,500 lands in your account, though you repay interest on the full $10,000. Credit unions and some online lenders offer no-fee loans, so it pays to shop; a slightly higher rate with no fee is often the cheaper deal on shorter loans.