How to Calculate a Loan Payment
The amortization formula behind every fixed monthly payment, explained plainly.
5 min read
Step by step
- Convert the annual rate to a monthly rate: rate ÷ 100 ÷ 12.
- Count the total number of monthly payments (years × 12).
- Payment = principal × r ÷ (1 − (1 + r)^−n).
- Example: $20,000 at 5% over 5 years is about $377.42 per month.
Key takeaway: Interest is charged on the remaining balance, so it shrinks every month.
Do it automatically
Monthly payment, total interest and a full amortization schedule.
Open the Loan Payment Calculator