This tool answers three common payment questions. Pick the one you need from the first box. If you choose the monthly payment, enter the loan amount, the interest rate and the term in years. If you want to know how long a loan will take to clear, enter the loan amount, the rate and the amount you can pay each month.
The third choice works backwards. Enter the monthly payment you are comfortable with, the rate and the term, and the calculator tells you the largest loan that payment can support. This is a good way to set a sensible borrowing limit before you start shopping for a car, a boat or a personal loan.
The boxes change depending on your choice, so you only see the fields that matter for that question. After you press Calculate, you will see the main answer first, followed by the loan amount, the payment, the number of payments, the total paid and the total interest. If your payment is too low to cover the interest, the tool will tell you instead of showing a result that makes no sense.
For the payment, the calculator uses: payment = loan x r / (1 – (1 + r) raised to minus n), where r is the yearly rate divided by 1200 and n is the number of months.
For the borrowing limit it turns the formula around: loan = payment x (1 – (1 + r) raised to minus n) / r. For the payoff time, it follows the loan month by month. Each month the interest is the balance times r, the rest of the payment cuts the balance, and it counts the months until the balance reaches zero. A payment smaller than the first month of interest can never clear the loan.