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Monthly loan payments are calculated using the standard amortization formula: M = P × [r(1+r)^n] / [(1+r)^n − 1], where M is the monthly payment, P is the principal (loan amount), r is the monthly interest rate (annual rate / 12), and n is the total number of payments. For example, a $25,000 loan at 7% for 5 years (60 payments) has a monthly payment of $495.03.

Extra payments go directly toward your principal balance, reducing the amount that accrues interest. This creates a compounding effect: as your balance decreases faster, less interest accumulates each month. For example, paying an extra $100/month on a $25,000 loan at 7% for 5 years saves $389 in interest and pays off the loan 8 months early.

An amortization schedule is a detailed table showing each payment over the life of a loan. For each payment, it breaks down how much goes to principal (reducing your balance) versus interest. Early in the loan, more of your payment goes to interest; over time, more goes to principal. Our calculator generates a complete amortization schedule you can view or export as PDF.

The interest rate is the base cost of borrowing expressed as a percentage. APR (Annual Percentage Rate) includes the interest rate plus other costs like origination fees and points, giving you the true annual cost of the loan. APR is typically slightly higher than the interest rate. Always compare APRs when shopping for loans to get the complete cost picture.

Longer loan terms mean lower monthly payments but higher total interest paid. For a $25,000 loan at 7%: a 3-year term costs $772/month with $2,794 total interest, while a 5-year term costs $495/month but $4,702 total interest — nearly double. Choose the shortest term you can afford to minimize total cost.