| Month | Payment | Principal | Interest | Balance |
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Everything You Need to Know About Loan Calculations
A loan calculator does one fundamental thing: it takes three inputs — how much you borrow, at what rate, for how long — and tells you exactly what you'll pay every month and what the total cost of borrowing will be. Simple concept, profound implications.
The principal — what you're borrowing. Not including fees, insurance or add-ons your lender may bundle in.
Use the APR (Annual Percentage Rate) for the most accurate picture. It includes the base rate and standard fees.
Longer terms = smaller payments but far more interest paid overall. The difference over 5 vs 7 years is thousands.
Early payments are mostly interest. As balance falls, more goes to principal. This is why extra early payments have outsized impact.
The maths behind the calculator
M = monthly payment | P = principal
r = monthly rate (annual ÷ 12) | n = total payments
7 loan facts that will change how you borrow
1. A 1% rate difference on a $300,000 mortgage costs over $60,000 over 30 years. Rate shopping isn't optional — it's the single highest-ROI financial action most people never take seriously.
2. One extra payment per year can cut 4–6 years off a 30-year mortgage. Because every extra dollar reduces the principal that interest is calculated on — the effect compounds in reverse.
3. Your first payment is your most expensive. Interest is charged on the outstanding balance, so month one carries the highest interest of any payment you'll ever make.
4. Personal loan rates range from 7% to 36%. At 36%, a $10,000 loan over 3 years costs nearly $7,000 in interest. At 7% the same loan costs under $1,100. Same loan, dramatically different cost.
5. Being "underwater" on an auto loan is normal and dangerous. In year one of a 60-month loan, most people owe more than the car is worth. Gap insurance exists for exactly this reason.
6. Student loan interest capitalises. If you don't pay interest during study, it's added to your principal at repayment — meaning you pay interest on interest from day one.
7. Bi-weekly payments are a legal hack. Instead of 12 monthly payments, 26 bi-weekly half-payments = 13 full payments per year. On a 30-year mortgage this saves 5+ years and tens of thousands in interest.
How to use your amortisation schedule strategically
Open the schedule above and look at month 1 vs month 60 (or your final month). In month 1, the majority of your payment is interest. By your final payment, almost all of it is principal. This tells you something critical: every extra payment you make in the first few years saves dramatically more than the same payment made later. If you have $500 extra this month, paying it off your loan principal in year 1 saves significantly more in interest than the same payment in year 8. The amortisation schedule shows you exactly why.
Comparing loan offers like a professional
Financial advisors don't just compare monthly payments — they compare total cost of borrowing. A lower monthly payment with a longer term can cost you thousands more overall. Use this calculator to model every offer you receive: enter each lender's rate and term and compare the "Total Payable" figure. That number — not the monthly payment — is the true cost of the loan.