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Loan Calculator: Figure Out Your Monthly Payments Before You Borrow

Before you sign any loan agreement, you need to know exactly what you're paying each month and how much interest you'll pay over the life of the loan. A loan calculator shows you both in seconds.

How Loan Payments Work

Every loan payment has two parts: principal (the amount you borrowed) and interest (the cost of borrowing). Early in the loan, most of your payment goes to interest. Later, more goes to principal.

The monthly payment depends on three things:

**Loan amount** — How much you are borrowing

**Interest rate** — The annual percentage rate (APR)

**Loan term** — How many months to pay it back

🎯Key Takeaway

The difference between a 4% and 6% interest rate on a $300,000 mortgage is over $130,000 in total interest over 30 years.

Why This Matters

A $300,000 mortgage at 6.5% for 30 years costs $1,896/month. But the total interest you'll pay is $382,633. That means you are paying more in interest than the house itself costs.

Change that to a 15-year loan at 6%, and your payment goes up to $2,531/month, but total interest drops to $155,683. You save $226,950 in interest.

💡Pro Tip

If you can afford the higher payment, a shorter loan term saves you a massive amount of money. Even paying an extra $100/month toward principal can save tens of thousands.

What to Compare

When shopping for loans, compare:

Monthly payment (can you afford it?)

Total interest (What is the real cost?)

APR (includes fees, not just the rate)

Prepayment penalties (can you pay it off early?)

Tips for Lower Payments

1. **Improve your credit score** — Even 20 points can lower your rate 2. **Make a larger down payment** — Borrow less, pay less 3. **Choose a shorter term** — Higher payments but much less interest 4. **Refinance when rates drop** — Keep an eye on market rates

⚠️Watch Out

Watch out for adjustable-rate mortgages (ARMs). The initial rate looks attractive, but it can increase significantly after the fixed period ends.