Is this the same formula banks use?

Yes. Most fixed-rate installment loans—personal, auto, mortgage—use this amortization formula. Small rounding differences can occur.

What if I pay extra one month?

Extra principal reduces the balance, so future interest is lower. Your next payment is still the same amount, but more of it goes to principal. The loan pays off faster.

How does a 0% loan work?

When the rate is 0, the formula simplifies: monthly payment = principal ÷ number of months. A $10,000 loan for 36 months at 0% is $277.78 per month.

Where can I see the full breakdown?

Our loan calculator with interest breakdown shows year-by-year principal and interest.

Simple Loan Payment Example Walkthrough

Currency

Loan Amount

Interest Rate (%)

Loan Term (months)

Monthly Payment

—

Total Interest

—

Total Payment

—

Loan calculator · Car loan · Mortgage

Planning only. Interest breakdown · Interest calculator

How to use this calculator

Enter the loan amount — Pre-filled; adjust if needed.
Enter the interest rate — Use the APR your lender quoted.
Enter the term in months — 36, 48, or 60 are common.
Click Calculate — See monthly payment, total payment, and total interest.

Example: $10,000 at 6% for 36 months

Borrow $10,000 at 6% annual, repaid over 36 months.

Standard amortization gives a payment of about $304.22/month.

Total paid ≈ $10,951.92—roughly $951.92 of that is interest.

Each payment splits between interest on the balance and principal. Month one at 0.5% monthly: ~$50 interest, ~$254.22 principal.

By month 36 the balance is tiny—almost the whole payment is principal.

The payment formula

Fixed payments use:

M = P × [r(1+r)^n] / [(1+r)^n − 1]

P = principal. r = monthly rate (annual ÷ 12). n = number of payments.

Here: P = 10,000, r = 0.005, n = 36 → M ≈ 304.22.

Try your own numbers

Use the calculator: bump to $15,000 and watch the payment rise.

Stretch to 48 months—it usually drops. Raise the rate to 8%—total interest climbs.

Same math for cars, personal loans, and mortgages—only inputs change.

Loan term vs monthly payment

How term affects your payment at $10,000 and 6.0% APR:

Term	Monthly Payment	Total Interest
24 months	$443	$637
36 months	$304	$952
48 months	$235	$1,273
60 months	$193	$1,600
72 months	$166	$1,932

Frequently asked questions

Is this the same formula banks use?: Yes. Most fixed-rate installment loans—personal, auto, mortgage—use this amortization formula. Small rounding differences can occur.
What if I pay extra one month?: Extra principal reduces the balance, so future interest is lower. Your next payment is still the same amount, but more of it goes to principal. The loan pays off faster.
How does a 0% loan work?: When the rate is 0, the formula simplifies: monthly payment = principal ÷ number of months. A $10,000 loan for 36 months at 0% is $277.78 per month.
Where can I see the full breakdown?: Our loan calculator with interest breakdown shows year-by-year principal and interest.