How a personal loan payment is calculated

A personal loan is typically an installment loan: you borrow a principal amount and repay it in equal payments over a fixed term. Each payment contains two parts: interest (the lender’s cost of lending you money) and principal (the portion that reduces the amount you still owe).

The math behind most installment loans is called amortization. Early in the loan, you usually pay more interest because your balance is high. Over time, as the balance drops, more of each payment goes toward principal. This is why paying a little extra early can save more interest than paying extra near the end.

If the interest rate per period is i (for monthly payments, i = APR / 12), and you have n total payments, the standard payment M for a loan amount P is:

M = P × i × (1 + i)ⁿ / ((1 + i)ⁿ − 1)

If your APR is 0% (rare, but possible in promos), the payment simplifies to M = P / n. This calculator applies the appropriate version automatically.

Some lenders allow biweekly or weekly payments. In that case, the formula is the same, but the “per period” rate changes. For example, biweekly uses 26 payments per year, so the per-period rate is approximately APR / 26 and the number of payments becomes years × 26. Paying more frequently can reduce interest slightly because principal falls faster, especially if you keep the same yearly total paid.

Many personal loans include an origination fee (often a percentage of the loan or a flat amount). Fees can be paid upfront or rolled into the loan. If paid upfront, you might borrow $10,000 but only receive $9,600 in your bank account after a $400 fee — yet you still repay based on the $10,000 principal. That’s why the “real” borrowing cost can be higher than the advertised interest rate.

This page includes an APR estimate that treats the fee as reducing the cash you receive on day one, then solves for the interest rate that makes the cash flows “match” your payment schedule. This is similar to how APR is conceptually defined (though lenders can use specific regulatory rules).

When you pay extra, most lenders apply it to principal. This reduces your balance faster, which lowers the interest charged in future periods. The result is:

• Shorter payoff time (fewer payments)
• Lower total interest
• Often the same scheduled payment (you just add extra on top)

This calculator simulates the schedule step-by-step with your extra payment included, so you can see the payoff period and the approximate savings.

Personal loan examples (realistic scenarios)

Here are simple examples to help you interpret the output. Your exact numbers will depend on rate, term, fees, and payment frequency — but the “shape” of the math stays the same.

• Loan amount: $15,000
• APR: 11.99%
• Term: 36 months
• Fees: $0

The calculator will output a monthly payment and total interest over 36 months. If you add even a small extra payment (like $50/month), you’ll typically see the payoff date move earlier and the total interest drop.

If the fee is paid upfront, you receive less cash but repay the same principal. The APR estimate usually rises, because from your perspective you got less money but still made the same payments.

If Loan A is 10.9% APR with a 4% fee, and Loan B is 12.5% APR with no fee, the “cheaper” loan is not obvious from APR alone. Enter both scenarios, save them, and compare total interest, total cost, and the APR estimate side-by-side.

• Payment answers “Can I afford this monthly?”
• Total interest answers “How expensive is this loan?”
• Interest share answers “How much of what I pay is ‘cost’ vs ‘repayment’?”
• APR estimate with fees helps compare different fee structures

Amortization preview (first 12 payments)

The schedule below shows how each payment splits into interest and principal. Most loans are interest-heavy at the beginning. If you’re adding extra payments, you’ll see principal fall faster and the payoff time shorten.

This is a preview table (first 12 periods + last row). Some lenders apply payments on different dates or use daily interest calculations. Treat this as a clear estimate.

Frequently Asked Questions

• What’s the difference between interest rate and APR?

  The interest rate is the cost of borrowing based only on interest. APR is meant to reflect the annual cost of the loan including certain fees (like origination), expressed as a yearly percentage. Two loans can have the same interest rate but different APRs if fees differ.

• If I pay biweekly, will I always save money?

  Often you’ll save some interest because principal falls sooner. The savings can be larger if your biweekly plan effectively pays more over the year (26 half-payments ≈ 13 monthly payments). Use the frequency toggle and compare total interest.

• Do extra payments always go to principal?

  Many lenders apply extra payments to principal by default, but rules vary. Some loans require you to specify “apply to principal” or they may advance the due date instead. Check your lender’s policy.

• Should I choose a longer term for a lower payment?

  A longer term lowers the payment, but usually increases total interest. If you need flexibility, you can take a longer term and still pay extra when possible — but confirm there are no prepayment penalties.

• Can this calculator replace lender disclosures?

  No. This is an educational estimator. Use your lender’s official disclosures for final numbers, and use this tool to understand the tradeoffs and compare scenarios consistently.