Loan Calculator: Everything You Need to Know

The most important thing to know when taking out a loan is how much your loan will cost over time. Here comes the loan calculator into play.

A loan calculator can help you estimate monthly payments, understand borrowing costs, and see how loan payments may fit into your budget.

In this article, you will learn everything you need to know about loan calculators.

Let’s get started!

Table of Contents

    What Is a Loan Calculator?

    A loan calculator is a tool that helps individuals or businesses estimate the cost of borrowing money and plan their loan payments. It allows you to input certain variables, such as the loan amount, interest rates, loan term, and any additional fees or charges, to calculate various aspects of the loan.

    person using a calculator

    Image Source

    With loan calculators, you can calculate: 

    Monthly payments: Loan calculators can determine the amount you must pay monthly to repay the loan over a specified term. It considers the principal amount, interest rates, and loan duration.

    Total interest: This calculation shows the total amount of interest you will pay over the life of the loan. It helps you understand the overall cost of borrowing.

    Amortization schedule: An amortization schedule provides a detailed breakdown of each payment over the loan term. It shows how much of each payment goes towards the principal amount and how much is applied to interest.

    Prepayment: Some loan calculators allow you to account for prepayments or additional payments to the loan principal. This feature helps you understand the impact of extra payments on the loan term and interest savings.

    Comparison: Loan calculators can also be used to compare different loan options. By inputting the details of multiple loans, you can evaluate their payments and total interest costs and select the most suitable option.

    Why Use a Loan Calculator

    A loan calculator can help you calculate how much your monthly repayment may be. You will know a monthly figure and the total repayable amount for your loan that could be offered based on the representative example.

    A loan calculator will tell you the cost of borrowing over the course of a year. You will see the APR (annual percentage rate) that outlines interest and extra charges based on your provided information.

    You need a loan calculator to anticipate the fixed annual interest rates you may be charged. By weighing out the figures, deciding if a loan is the right option will be much easier.

    With all this information, you will have a bigger and clearer picture of your financial future.

    private student loans

    Image Source

    It’s crucial to know the basics before you learn how to use a calculator for your loans.

    Loan Basics for Borrowers

    • The interest rate is the profit that banks or lenders make on loans. Loan interest is usually stated as the APR (annual percentage rate). This figure encompasses both the interest charged and any accompanying fees.
      Banks publish the annual percentage yield for savings accounts, money market accounts, and CDs.
    • The loan term is the duration of the loan. Usually, a longer term means more interest will accrue over time, which will raise the total cost of the loan for borrowers.
    • The difference between secured loans and unsecured loans. A secured loan is a loan where the borrower has put up some assets as collateral before being granted a loan. On the contrary, an unsecured loan is an agreement to repay a loan without collateral.

    How to Use a Loan Calculator

    To use a loan calculator, follow these general steps:

    1. Identify the loan details.
      Determine the specific details of the loan you want to calculate. This includes the loan amount, interest rate, loan term (in months or years), and any other fees or charges.
    2. Find a loan calculator.
      There are many different online calculators you can use free of charge, but our recommendation is Financial Calculators. With these calculators, you can cover various aspects of your finances, including loan calculations.
    loan calculator fields

    Image Source

    1. Input loan details.
      Enter the loan details into the calculator. Typically, you’ll find fields to input the loan amount, interest rate, and loan term. If there are any additional lender fees or charges, there may be separate fields to include those as well.
    2. Select calculation options.
      Some loan calculators offer additional options, such as choosing the compounding frequency (monthly, quarterly, annually) or specifying whether the interest rate is fixed or variable. Make sure to select the appropriate options if available.
    3. Calculate the results.
      Once you’ve entered all the necessary details, click on the “Calculate” or “Calculate Loan” button. The loan calculator will process the information and provide the results.
    4. Review the results.
      The loan calculator will generate various results, such as the monthly payment amount, total interest cost, and possibly an amortization schedule. Take the time to review and understand the information provided.
    5. Refine and compare.
      If you want to compare different loan options, repeat the process by inputting the details of each loan into the calculator. Compare the results to evaluate each loan option’s affordability and overall cost.
    6. Adjust for additional factors.
      If you plan to make prepayments or have other unique factors, some loan calculators provide options to account for these variables. Adjust the inputs accordingly to see the impact on the loan term, interest savings, or monthly loan payments.
    loan calculator example

    Image Source

    Remember that loan calculators provide estimates and general information based on the inputs provided. 

    Actual loan terms, interest rates, and fees may vary, so it’s always important to consult with a financial advisor or lender to get precise details and understand the specific terms and conditions of any loan you’re considering.

    Different Loan Calculators

    There are various types of loan calculators available to cater to different loan scenarios and needs. Here are some common types of loan calculators:

    • Standard loan calculator. This is the most basic type of loan calculator that helps calculate the monthly payments, total interest cost, and loan term based on the loan amount, interest rate, and loan term.
    • Mortgage calculator. Mortgage calculators are specifically designed for calculating home loans. They consider factors such as loan amount, interest rate, loan term, down payment, property taxes, and insurance. These factors determine a monthly mortgage payment and other mortgage-related details like private mortgage insurance.
    • Auto loan calculator. Auto loan calculators are tailored for calculating car loans. They take into account the amount, loan interest rate, loan term, and down payment to calculate monthly payments, total interest cost, and other relevant information.
    • Personal loan calculator. Personal loan calculators assist in estimating monthly payments, interest costs, and loan terms for unsecured personal loans. They consider variables such as loan amount, loan interest rate, loan term, and sometimes additional fees.
    • Student loan calculator. Student loan calculators are designed specifically for college loans. They help determine monthly payments, total interest costs, and repayment options based on the loan amount, interest rate, loan term, and any specific features of student loans like deferment or income-driven repayment plans.
    • Debt consolidation calculator. Debt consolidation calculators assess the feasibility and potential savings of consolidating multiple debts into a single loan. They consider the outstanding balances, interest rates, and loan terms of existing debts to calculate the combined monthly payment and potential interest savings.
    • Prepayment calculator. Prepayment calculators help estimate the impact of making extra payments or prepayments toward a loan. They calculate the potential interest savings, reduced loan terms, and revised monthly payments based on the additional payments made.
    list of different calculators related to loans

    Image Source

    Benefits of Using a Loan Calculator

    Here is the list of benefits you will receive after using a loan calculator:

    Financial Planning

    A loan calculator helps you plan your finances by clearly understanding the monthly payment required for a specific loan. It allows you to assess whether you can comfortably afford the loan and incorporate it into your budget.

    Loan Comparison

    By inputting the details of different loan options into a calculator, you can compare the monthly payment, total interest costs, and overall affordability. This empowers you to make an informed decision and select the most suitable loan for your needs.

    Cost Estimation

    Loan calculators help you estimate the total cost of borrowing by calculating the total interest paid over the loan term. This information is valuable in determining whether the loan is financially viable and if the interest charges are reasonable.

    Amortization Analysis

    Loan calculators generate an amortization schedule that breaks down each payment, showing the portion that goes toward interest and principal. This allows you to visualize the loan’s progress and understand how each payment affects the loan balance.

    Prepayment Evaluation

    If you plan to make additional payments or prepay the loan, a loan calculator can help you assess the impact of these extra payments. It shows how much interest you can save and how it affects the loan term.


    Instead of manually performing complex calculations, loan calculators automate the process, saving you time and effort. With just a few inputs, you can obtain accurate and detailed loan information instantly.


    By using a loan calculator, you gain a better understanding of terms, loan costs, and payment schedules. This knowledge empowers you to negotiate better loan terms, identify potential pitfalls, and make informed financial decisions.

    benefits of using a loan calculator chart

    Final Words

    Loan calculators are a fantastic tool that can help you better understand your loan and organize your money.

    Studies have shown that about 22.5 million Americans have personal loans. That means you’re highly likely to have at least one loan type. This further means you must use the personal loan calculator to understand your situation and erase the debt.

    The huge problem in the USA is that we think it’s normal to take out personal loans. We’ve lived that way for decades now.

    No one teaches us that it doesn’t have to be that way.

    The current banking system is only beneficial for banks—they are getting wealthier and wealthier while people get more and more in debt.

    Our mission is to turn this table around.

    Instead of teaching you what loan types you should consider, we teach you how to generate cash flow, erase the debt, and live a financially stable and wealthy lifestyle.

    Want to learn more?