How to Calculate Loan Repayments
Most loans use the standard amortization method — equal monthly payments throughout the loan term.
Monthly Payment Formula
M = P × [r(1+r)ⁿ] ÷ [(1+r)ⁿ − 1]
M = Monthly payment
P = Principal loan amount
r = Monthly interest rate (annual rate ÷ 12)
n = Number of months
Example
$25,000 loan at 7% APR for 4 years (48 months):
r = 7% ÷ 12 = 0.583% = 0.00583
M = 25,000 × [0.00583×(1.00583)⁴⁸] ÷ [(1.00583)⁴⁸−1]
M ≈ $598/month
Total paid: $28,704 | Interest: $3,704
How to Save on Interest
- Pay off early when there's no prepayment penalty
- Add extra monthly payments — even $50 extra saves hundreds
- Choose a shorter term if the higher payment is affordable
Related Calculators: