Free tool · Any currency
Loan & EMI calculator
The monthly payment, and the two things most calculators leave out: where the money actually goes year by year, and what happens if you pay a little extra. It takes a number rather than a currency, so the answer is right in rupees, dollars, pounds or dirhams alike.
The sum behind the number
An amortising loan has one payment that never changes, worked out so that the last one clears the balance exactly. The formula is:
payment = P × r × (1+r)n ÷ ((1+r)n − 1)
where P is the amount borrowed, r is the annual rate divided by 12 and by 100, and n is the number of months. At a rate of zero the formula divides by zero and the answer is just the amount divided by the months — which is what an interest-free instalment plan is, and the calculator handles it rather than erroring.
Why your first payments are nearly all interest
This is the part that surprises people, and it is not a trick. Interest is charged on what you still owe, and at the start you still owe almost all of it. The payment is level, so the split inside it moves: the interest part is biggest in month one and shrinks every month, while the principal part grows to fill the gap.
On a 25-year home loan at a typical rate, roughly the first third of the term goes by before the payment is even half principal. That is why two years into a long loan the balance has barely moved, and why the year-by-year table above is worth reading before signing anything — it turns an abstract rate into the actual shape of the debt.
What paying a little extra really does
Every extra amount you pay comes straight off the principal, and from that moment it stops accruing interest for the whole remaining life of the loan. That compounding backwards is why the effect is so much larger than it looks.
Two things make it larger still: paying early rather than late, because there are more remaining months for the saving to compound over; and a long term, because there is more interest in the loan to remove. On a short, cheap loan the effect is small. On a long, expensive one it can remove years. Put a figure in the extra box above and the tool shows exactly how many months and how much interest, for your numbers rather than an example.
One thing to check before you do it: some lenders charge an early settlement or prepayment fee, and some apply an extra payment to the next instalment rather than to the principal — which does nothing at all for the interest. Ask which one they do, in writing.
Flat rate and reducing balance are not the same number
This is the single most useful thing on this page, and it costs people real money. A reducing balance rate charges interest on what you still owe, which falls every month. A flat rate charges it on the original amount for the whole term, as though you never paid anything back.
The rough rule for a loan of a few years is that a flat rate is worth close to double as a reducing rate. A "flat 10% for five years" is in the region of 17% reducing. They are not comparable numbers, and quoting the flat one is how a more expensive loan is made to sound cheaper than a bank's.
To compare properly, ignore both rates and ask one question: what is the total amount I will repay? That number cannot be dressed up. Divide it by the amount borrowed and you have the real cost, whatever anyone called the rate. This calculator works in reducing balance, which is what banks and mortgages use — if you have a flat quote, work out its total repayment by hand and compare the totals.
Rate, APR, and which one to compare
The interest rate is the cost of borrowing the money. The APR is supposed to include the compulsory fees as well — arrangement fees, processing charges — expressed as a yearly percentage, so that two offers can be compared on one number.
Which means the loan with the lower interest rate is not automatically the cheaper loan. A 12% loan with a heavy arrangement fee can cost more than a 13% loan with none. Where an APR is published, compare APRs. Where it is not, add the fees to the amount repaid yourself and compare the totals — the same test as above, and it never lies.
Questions
How is a monthly loan payment calculated?
With the amortising payment formula: P × r × (1+r)^n ÷ ((1+r)^n − 1), where P is the amount borrowed, r is the annual rate divided by 12 and by 100, and n is the number of months. The payment stays the same every month while the split inside it moves steadily from interest toward principal.
Why is my early loan payment almost all interest?
Because interest is charged on what you still owe, and at the start you still owe nearly everything. The payment is level, so the interest part is largest at the beginning and shrinks every month as the balance falls, which is why the principal part grows even though the payment does not change.
How much does paying extra each month save?
More than most people expect, because every extra amount comes off the principal and then stops accruing interest for the whole remaining life of the loan. The effect is largest early on and on long loans — a small extra payment in year one of a 25-year loan can remove several years from the term.
What is the difference between a flat rate and a reducing balance rate?
A flat rate charges interest on the original amount for the whole term, even though you are paying the loan down. A reducing balance rate charges it only on what you still owe. A flat 10% is roughly equivalent to 17% reducing on a five-year loan — close to double — so the two numbers are not comparable and a lender quoting a flat rate is quoting a smaller-sounding number for the same debt.
Is APR the same as the interest rate?
No. The interest rate is the cost of borrowing the money; the APR is meant to include the compulsory fees as well, which makes it the better number for comparing offers. Two loans at the same rate can have very different APRs, and the one with the lower rate is not automatically the cheaper loan.
Which currency does it use?
Whichever you are thinking in. It takes plain numbers, and the arithmetic of an amortising loan is identical in every currency, so the answer is correct in all of them. If you want the Pakistan-specific version with Ijarah and Diminishing Musharakah, that is the car and home finance calculator.
Why is my bank's figure slightly different?
Usually rounding, or a fee rolled into the payment, or a first month counted from a date rather than as a whole month. A difference of a currency unit or two is normal; a difference of several percent means something is in the payment that is not in the rate, and it is worth asking what.
Does it handle a zero-interest instalment plan?
Yes. Enter 0 as the rate and it divides the amount by the number of months, which is what those plans actually are.
Is anything sent anywhere?
No. It runs entirely in your browser — no upload, no account, no server that sees your numbers.
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