Monthly Payment Calculator

What formula does the payment calculator use?

This tool uses payment = P × r ÷ (1 − (1 + r)^−n), with r equal to the annual rate ÷ 12 and n equal to the term in years × 12. Payments are level, monthly and made at the end of each month, with interest charged on the remaining balance. The defaults ($25,000, 7.5%, 5 years) produce $500.95 a month.

What does the “Payment if Rate +1%” line mean?

It reruns the same formula with the rate you entered plus one percentage point, keeping the amount and term, and shows the difference. At the defaults the payment would be $512.91, which is $11.96 more per month. It is a sensitivity check on the arithmetic, not a forecast that your rate will change.

Is the term entered in years or months?

In years. A 36-month loan is entered as 3. Fractions are multiplied through, so 2.5 years becomes 30 payments, but a term that does not give a whole number of months is not rounded, which can make the formula use a fractional payment count.

How are 0% and empty inputs treated?

A rate of 0 is respected: the payment is the amount divided by the number of months, so $12,000 over 4 years is $250.00 and interest is $0.00. A loan amount or term of 0 gives n/a rather than an infinite result. Note that a blank number field reaches the calculation as 0.

Why does a longer term lower the payment but raise total interest?

Spreading the same balance across more months shrinks each payment, but the balance stays outstanding longer and accrues interest for more months. On $25,000 at 7.5%, 3 years costs $2,995.60 in interest and 7 years costs $7,210.38, with all other inputs unchanged.

Are fees, taxes or insurance included?

No. Origination or processing fees, taxes, insurance, late charges and prepayment penalties are not part of the formula, and the amount you enter is treated as fully paid out to you. If a lender deducts a fee from the proceeds, the real cost is higher than shown.

Does it handle extra payments, balloons or variable rates?

No. Every payment is identical, the rate is fixed for the whole term and nothing is left over at the end. Interest-only periods, balloon payments, skipped payments and rate resets would each need a different calculation.

How are the displayed numbers rounded?

Values are shown to two decimals, but totals are the unrounded payment multiplied by the number of payments. A lender who rounds each instalment to the cent may show totals that differ by a few cents, and the lender’s schedule governs.