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Find out exactly what a loan or mortgage costs you each month, how much interest you will pay in total and when it will be cleared. Press Calculate.

Written and reviewed by SM Arijul Islam · Last reviewed · Editorial standards · Report an error

How the instalment is calculated

This is a standard fixed-rate amortising loan. Interest accrues on the outstanding balance and the instalment stays the same, so early payments are mostly interest while later payments are mostly principal.

Payment = P × i ÷ (1 − (1 + i)−n) where i is the periodic rate and n the number of payments.

  • More frequent payments reduce total interest
  • A longer term lowers the instalment but raises total interest
  • Fees are added to the loan amount and therefore also attract interest
Estimates only — lenders add arrangement fees, insurance and compounding conventions. Ask for a formal quotation before signing. Not financial advice.

Worked example

Borrowing 15,000 at 7% over 3 years gives a monthly payment of about 463. Over the term you repay roughly 16,670, so the interest is about 1,670. Stretching the same loan to 5 years lowers the payment but raises the total interest.

Everyday uses

  • Budgeting a fixed monthly instalment
  • Comparing offers from different lenders
  • Checking what you can comfortably afford
  • Seeing the cost of a longer term
  • Planning a car, personal or mortgage loan

Frequently asked questions

This one gives the fixed instalment for a straightforward loan; the loan calculator also models extra payments and the full schedule.
It reduces each payment but increases total interest, because you are borrowing for longer.
No. Add arrangement fees or insurance separately if you want the true total cost.
Yes. The maths is identical for any fixed-rate loan repaid in equal instalments.

More worked examples

  • A 20,000 loan over five years at 6 percent costs 386.66 a month.
  • Repaying that over 60 months totals 23,199, of which 3,199 is interest.
  • At 4 percent instead, the same loan costs 368.33 a month, saving about 1,100 over the term.
  • A zero percent loan is simply the amount divided by the number of months.

20,000 over five years

Monthly payment for a 20,000 loan repaid over five years at various annual rates
Annual rateMonthly payment
4%368.33
5%377.42
6%386.66
8%405.53
10%424.94

Common mistakes to avoid

  • Forgetting that a headline rate is annual while the payment is monthly, so the periodic rate is the annual one divided by twelve.
  • Ignoring arrangement fees, insurance and early repayment charges, all of which change the true cost.
  • Assuming overpayments are always allowed. Many fixed-rate loans cap them or charge a penalty.
  • Choosing a longer term purely for the lower monthly payment, without checking the much larger total interest.

Further questions

The payment equals the amount times the periodic rate times one plus the rate to the power of the number of periods, all divided by that same power minus one.
Because interest accrues on the outstanding balance for longer, so even though each payment is smaller, there are far more of them.
A table showing how each payment splits between interest and principal. Early payments are mostly interest, and the balance falls slowly at first.
It can. Twelve monthly payments become twenty-six half payments, which adds up to one extra monthly payment a year and shortens the term.

Assumptions and sources

This is a fixed-rate amortising loan: interest is charged on the outstanding balance and the instalment stays level. The result excludes arrangement fees, insurance, taxes and early-repayment penalties, and it assumes the rate does not change.

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