Why use this calculator
The monthly repayment is the number a lender leads with, and the total interest is the number that decides whether a loan is a good idea. They pull in opposite directions: stretching a loan over a longer term lowers the repayment and can easily add more interest than the original purchase cost.
This calculator shows both at once, along with the schedule that explains why a loan barely moves in its early years. It also prices the one lever borrowers fully control, paying a little extra each month, which on a typical mortgage removes years from the term and tens of thousands from the interest bill.
How to use it
- Enter the amount you will actually borrow, which is the purchase price less any deposit or trade-in, not the price itself.
- Use the nominal interest rate from the loan offer rather than the comparison rate, because the comparison rate bundles fees and is not what the repayment is calculated from.
- Set the term in years, remembering that the longest term offered is rarely the cheapest.
- If you intend to pay more than the required amount each month, enter it in the extra repayment field and the calculator will show how much earlier the loan clears.
- Zero per cent is a valid rate and is handled properly.
What each result means
- Monthly repayment
- The fixed amount due each month to clear the loan exactly at the end of the term. Fees charged by the lender sit on top of this.
- If you pay half of it every fortnight
- What changes if you pay half the monthly repayment every fortnight instead. A year has 26 fortnights, so you make one extra monthly repayment a year and clear the loan sooner.
- Total interest paid
- The full cost of borrowing over the life of the loan. On long terms this frequently exceeds the amount borrowed.
- Total amount repaid
- Principal plus interest: everything that leaves your account over the full term of the loan.
- Interest as a share of the loan
- Total interest divided by the amount borrowed. Above 100% means you repay more in interest than you borrowed.
- First month's interest
- How much of your very first repayment is interest rather than principal. It shows why early extra repayments are so effective.
- Repayment including extra
- What you would actually pay each month including your voluntary extra amount.
- Loan cleared in
- How long the loan takes with the extra repayment, and how much earlier that is than the contracted term.
- Interest saved by paying extra
- The interest avoided by repaying faster. Every dollar of extra principal removes all the future interest that dollar would have generated.
The formula
The repayment comes from the standard amortisation formula
M = P × [r(1+r)ⁿ] ÷ [(1+r)ⁿ − 1]
- M
- the monthly repayment
- P
- the principal borrowed
- r
- the monthly interest rate (the annual rate divided by twelve)
- n
- the total number of monthly payments (years × 12)
When the rate is zero the formula reduces to P ÷ n, which is why interest-free finance simply divides the balance across the term. Total interest is the sum of all repayments minus the principal.
How this number is used in practice
The term is the lever borrowers underestimate. Taking a $30,000 car loan over seven years instead of five drops the repayment by around $130 a month and adds roughly $3,500 of interest. While the car is worth substantially less at the end of the longer term. Lenders advertise the repayment because it is the number that makes a loan feel affordable.
Extra repayments are the closest thing to a guaranteed return available to most households. Paying an extra $200 a month on a $500,000 mortgage at 6% removes about four and a half years and over $100,000 of interest. Because you avoid interest at the loan's rate, it is the equivalent of a risk-free, tax-free investment returning that rate. Which almost nothing else does.
A comparison rate exists because the headline rate is not the whole cost. It folds establishment fees, ongoing fees and discharge fees into a single figure calculated on a standard loan size. It is not the rate used to calculate your repayment, so use the nominal rate here and the comparison rate for choosing between offers.
Worked examples
$250,000 at 6.5% over 30 years
Monthly repayment $1,580.17, total interest $318,861. More than the amount borrowed.
The same loan with $200 extra each month
Cleared in about 25 years instead of 30, saving roughly $70,000 of interest.
$30,000 car loan at 0% over 5 years
Repayment of exactly $500 a month and no interest. Interest-free finance divides the balance evenly.
When people use it
- Comparing loan offers from different lenders on total cost, not just the repayment
- Checking whether a repayment fits your budget before applying
- Deciding between a shorter term and a lower monthly payment
- Working out what paying an extra amount each month is worth
- Understanding how much of an early repayment goes to interest
Tips
- Compare loans on total interest as well as repayment. A longer term always looks cheaper monthly and costs more overall.
- Even 0.5% of rate difference on a $500,000 loan over 30 years is roughly $57,000. Ask your lender for a discount before refinancing.
- Extra repayments made early are worth far more than the same amount later, because they remove interest for the remaining term.
- Check for early repayment penalties on fixed-rate loans before paying extra. Break costs can exceed the interest saved.
- The comparison rate includes fees and the nominal rate does not. Use the nominal rate for repayments and the comparison rate for choosing.
- Interest-free finance is genuinely 0% only if you clear it within the promotional period. The deferred interest afterwards is usually punitive.
What it assumes, and where it stops being accurate
- A fixed rate for the whole term. Variable rate loans will change repayments as rates move.
- Interest is calculated monthly on the outstanding balance. Most lenders accrue daily and debit monthly, which shifts the result by a few cents.
- Establishment, ongoing account and discharge fees are excluded. Add them when comparing offers.
- Repayments are assumed to be made on time and in full; missed payments capitalise interest and extend the term.
- Extra repayments are assumed to be allowed without penalty, which is not always true on fixed-rate loans.
Terms used on this page
- Principal
- The amount borrowed, before interest.
- Amortisation
- Repaying a loan through regular fixed payments that cover interest first and reduce principal with the remainder.
- Comparison rate
- A single rate combining interest and standard fees, used to compare loans on a like-for-like basis.
- Break cost
- A fee charged for repaying or refinancing a fixed-rate loan early.
Questions people ask
- How is a monthly loan repayment calculated?
- Using the amortisation formula M = P × [r(1+r)ⁿ] ÷ [(1+r)ⁿ − 1]. It solves for a fixed payment that exactly clears the loan over n periods while charging interest on the declining balance. Every lender uses it for standard principal and interest loans, which is why a calculator can reproduce a bank quote to within a few cents.
- Why is my lender's repayment slightly different?
- Most lenders accrue interest daily and debit it monthly rather than applying a clean monthly rate, and months have different lengths. Lenders may also add monthly account fees or package fees to the repayment. The differences are cents on a personal loan and a few dollars on a mortgage; anything larger usually means a fee you have not accounted for.
- Should I take a longer term to lower the repayment?
- Only if you need to. A longer term lowers the monthly commitment and raises total interest substantially. A thirty-year mortgage costs far more than a twenty-year one on the same amount. A common middle path is to take the longer term for the lower committed repayment, then voluntarily pay it like the shorter one.
- How much does paying extra actually save?
- More than most people expect, because each extra dollar of principal removes all the future interest that dollar would have attracted. On a $250,000 loan at 6.5% over thirty years, an extra $200 a month clears it about five years early and saves roughly $70,000. The saving is larger the earlier you start.
- What is the difference between the interest rate and the comparison rate?
- The interest rate is what your repayment is calculated from. The comparison rate folds establishment, ongoing and discharge fees into a single annual figure on a standardised loan, so it reflects total cost better but does not match any actual repayment. Use the interest rate here, and the comparison rate when choosing between lenders.
- Is a 0% interest loan really free?
- Only if you clear it inside the promotional period. Many interest-free offers are deferred-interest arrangements that charge the full accrued interest retrospectively if any balance remains at the end. Others charge establishment or monthly account fees that make the effective cost meaningful despite the zero headline rate.
Use this with
Loan Repayment Calculator answers one part of the question. These pick up where it stops: Mortgage Calculator, Car Loan Calculator, Credit Card Payoff Calculator and Debt Consolidation Calculator.
Where these figures come from
This calculation is jurisdiction-neutral arithmetic. No country-specific rules are applied.
- ASIC Moneysmart: loans and credit. Independent Australian guidance on borrowing costs
- Reserve Bank of Australia: indicator lending rates. Published lending and deposit rates
Loan Repayment Calculator produces an estimate for general information. It is not financial, tax, medical, legal or engineering advice. read the full disclaimer. Spotted a wrong number? Report it and it gets fixed. The form picks up this calculator and the inputs you used.