When you are preparing to borrow, it pays to determine loan payments before you call a bank, credit union or online lender.
*Please note that we do not offer loans. This calculator is for education purposes and to illustrate how loans work.*
The Custom Loan Calculator Explained
Loan payments depend on three inputs: the amount you borrow, the interest rate and the number of monthly payments. If you want help assessing affordability in the context of your full plan, we can help you determine loan payments that fit your budget.
Calculator Inputs to Determine Loan Payments
- Loan Amount – The total you plan to borrow. Include taxes, fees or other up-front costs that roll into the balance.
- Number of Months (Loan Term) – The length of the contract in months. Longer terms usually mean lower payments but can come with higher rates and slower principal reduction.
- Interest Rate – Your rate reflects several factors: your credit profile, current market conditions, loan term length, use of funds and your overall finances.
- Start Date (if applicable) – Aligns your first payment and the amortization schedule.
- Extra Principal (optional) – Paying a bit extra toward principal can shorten the term and reduce total interest.
Calculator Outputs
- Monthly Payment – The amount you owe each month for the life of the loan. Many installment loans have fixed payments. Some products like HELOCs and ARMs have rates that can change.
- Total Interest – The cumulative interest paid over the full schedule.
- Total Principal and Interest – Principal plus interest over the life of the loan.
Example: A $500,000 loan for 180 months at 5.0% yields an estimated monthly payment of $3,953.97. Total interest is about $211,714, for a total outlay near $711,714. Use the calculator in this post to confirm your numbers and to determine loan payments for your situation.
For illustration only. Actual terms will vary by lender and borrower profile.
9 Loan Tips to Keep in Mind
- Interest Rates – Rates can be fixed or variable. Read all documents carefully.
- Balloon Payments – A low initial rate can mask a large amount due later. Know the schedule.
- Secured vs Unsecured – Secured loans use collateral and usually carry lower rates. Unsecured loans rely on your credit and often cost more.
- Credit Score Impact – Strong credit improves approval odds and pricing. On-time payments help. Late payments hurt.
- Types of Loans – Mortgages, auto loans, student loans, personal loans and business loans each have distinct terms and risks.
- Amortization – Early payments are interest heavy. Later payments retire more principal.
- Origination Fees – Up-front charges can add up. Some fees are negotiable. Ask questions.
- Prepayment Penalties – Some contracts charge fees for early payoff. Verify before you accelerate payments.
- Refinancing – Replacing a loan can lower costs or change terms. Re-run the numbers to determine loan payments after the switch.
Determine Loan Payments – Final Thoughts
Understanding how lenders determine loan payments puts you in control. Price the loan, compare options and be sure the monthly figure fits comfortably within your budget before you sign.
Can We Help You With Your Personal Financial Situation?
For more than 48 years we have collaborated with clients as they pursue long-term financial goals. We keep your objectives, concerns and investment temperament at the heart of your plan.
If you are considering a large purchase and want guidance, contact Jason R. Clark, CFA at 949.424.1013 or jclark@kovitz.com.
