Loan details
Applied to principal. Check that your servicer does the same rather than advancing your due date.
What one percentage point is worth
Rate shopping feels tedious for what looks like a small difference. Here is what each point actually costs on the loan you entered, so you can judge whether another afternoon of comparing lenders is worth it.
| Rate | Monthly | Total interest | vs your rate |
|---|
Amortization schedule
Each row is one payment. Watch the split: the interest column shrinks and the principal column grows, while the payment itself never changes.
| # | Payment | Principal | Interest | Balance |
|---|
Calculators for specific loans
The calculator above handles any fixed-rate loan. Each of these adds the arithmetic that is specific to one kind of borrowing — the part general calculators leave out.
Auto loan
Adds sales tax, trade-in and fees, then tracks your loan balance against the car's depreciation to show the month you stop being underwater.
Personal loan
Solves for the true APR once the origination fee is deducted from your proceeds, and compares consolidating against credit card minimums.
Student loan
Models interest accruing while you are in school and during the grace period, and what it costs when it capitalizes.
Reading a loan offer
The formula behind the number
Fixed-rate loans use the annuity formula. The payment is set so that the same amount, paid every month for the full term, exactly clears the balance including interest. Because interest is charged on what you still owe, and what you still owe is largest at the start, the earliest payments are mostly interest and the last ones are almost entirely principal. The payment never changes; only its composition does.
Rate versus APR
The interest rate is the price of the money. The APR is the interest rate plus fees, annualised — which makes it the only fair basis for comparing two offers. If a lender's advertised rate and disclosed APR are the same, there are no fees. If the APR is higher, the gap is what the fees cost you. Comparing rate against APR across two lenders is how people end up choosing the more expensive loan.
Why the monthly payment is the wrong thing to negotiate
Lenders and dealers prefer to discuss the monthly payment because almost any payment can be reached by extending the term. A payment that drops by forty dollars looks like a win; if it came from adding two years, it is not. Compare total interest across the options instead — the rate comparison table above does this for rate, and each specialised calculator does it for term.
Where extra payments do the most work
An extra payment early reduces the balance that every later interest charge is calculated on, so its effect compounds across the remaining term. The same amount paid in the final year saves only the interest on that last balance. If you intend to pay extra at all, front-loading it is worth substantially more than spreading it out.
Before you sign
Get quotes from at least three lenders, including a credit union, and pre-qualify where possible so comparisons use soft credit checks. Read the disclosure box rather than the advertisement. The Consumer Financial Protection Bureau publishes neutral, plain-language explanations of common consumer loans, and you can check your credit reports at no cost through AnnualCreditReport.com, the site authorized under federal law.
Common questions
How is a loan payment calculated?
Fixed-rate loans use the annuity formula, which sets a constant payment that exactly clears the balance plus interest over the term.
The payment stays the same every month, but the split between interest and principal shifts: interest is charged on the outstanding balance, which is largest at the start and smallest at the end.
Why does so little of my early payment go to principal?
Each month's interest is the outstanding balance times one twelfth of the annual rate, and it comes off the top. Whatever is left reduces principal. Early on the balance is at its peak, so interest takes the biggest share.
This is also why an extra payment in year one saves far more than the same amount in the final year.
Interest rate or APR — which should I compare?
APR. It includes fees, so it reflects what the loan actually costs. The interest rate alone tells you nothing about origination or processing charges.
When a loan has no fees, the two numbers are identical. When they differ, the gap is the fee.
Does paying extra each month actually help?
Yes — as long as it goes to principal. Reducing principal reduces every future interest charge, which shortens the term and cuts total interest.
Worth verifying with your servicer: some apply extra payments by advancing your next due date rather than reducing the balance, which achieves nothing.
What term should I choose?
Shorter means a higher payment and much less total interest. Longer means the reverse. The deciding factor is usually whether the shorter payment fits your budget with room to spare, since a missed payment costs more than the interest saved.
Is this accurate for my loan?
It is accurate for fixed-rate, equal-payment amortizing loans — most mortgages, auto loans, personal loans and standard student loan repayment.
It does not model variable rates, interest-only periods, balloon payments, or daily interest accrual. For those, your lender's schedule is the one that counts.