How to Calculate Loan Payments & Total Interest
Personal, auto, and installment loans use the same core amortization math as mortgages—only the term and fees differ. **APR** helps compare offers because it includes some fees; **monthly payment** alone can hide a expensive loan if the term is stretched long.
Core formula
Payment = P × [r(1+r)ⁿ] / [(1+r)ⁿ − 1]Step by step
1. Use amount financed
Subtract down payment and rebates from price. Add financed fees only if they are rolled into the loan.
2. Convert APR to monthly r
r = APR ÷ 12. For odd payment frequencies, match the lender’s compounding rules.
3. Compute total cost
Total paid = payment × n + upfront fees. Total interest ≈ total paid − principal financed.
APR vs monthly payment (what to compare)
Two loans with the same payment can have different total cost if terms or fees differ.
- Lower payment, longer term: Often pays more total interest even at a similar APR.
- Lower APR, higher fees: APR attempts to capture fees—still read the cash due at signing.
- 0% promo APR: Check what rate applies after promo ends; model both phases.
- Early payoff: Confirm no prepayment penalty; extra principal saves interest linearly in amortization.
Use our calculators
Common mistakes
- Quoting sticker price instead of financed amount
- Ignoring doc fees and GAP on auto loans
- Choosing term only to minimize payment
FAQ
Is APR the same as interest rate?
APR includes certain fees and is a better comparison metric than nominal rate alone.
How do extra payments work?
They reduce principal; interest on future months drops—use an amortization view to see savings.