OraA payment that reduces the balance
Monthly payment M = P × i ÷ [1 − (1 + i)−n], with principal P, monthly rate i = annual nominal rate ÷ 12 and n monthly payments. At zero interest, M = P ÷ n. This is a constant-rate, end-of-month repayment model, consistent with Microsoft: constant-payment loan calculations.
The schedule charges interest on each opening balance, then applies the rest of the payment to principal. It rounds each month's interest and payment to the currency's minor unit, and adjusts the final payment to clear the balance.
Borrowing 10,000.00 for 36 months
At an illustrative annual 6%, the monthly rate is 0.5%. The formula gives 304.219374…; the regular payment rounds to 304.22. Under this tool's monthly rounding convention, total interest is 951.88 and the final payment is 304.18.
In month one, interest is 10,000 × 0.005 = 50.00. The payment repays 254.22 of principal, leaving 9,745.78. The next month's interest is calculated on that smaller balance.
Follow the loan amortization example to see how each payment divides into interest and principal. To change the payment plan while keeping the original loan assumptions visible, compare the extra-payment calculator.
Payment is only one part of cost
A longer term can reduce the required payment while increasing interest paid across the full term. Compare total repayment, fees, flexibility and the time you remain in debt. Upfront or recurring charges are outside this basic schedule.
The entered interest rate is not automatically an APR. CFPB: mortgage interest rate and APR explains that mortgage APR is a broader cost measure; specific disclosures depend on the product and jurisdiction.
When this model does not fit
Variable-rate loans, interest-only periods, balloon payments, daily accrual, missed payments and irregular dates need different schedules. Your lender's agreement and statement take precedence over this educational estimate. Even a fixed loan can differ slightly because of payment dates and rounding.
Common questions
Should I enter APR as the interest rate?
Use the contractual rate that accrues on the balance. An APR may incorporate other costs and may not produce the correct contractual payment.
Why is the last payment different?
Regular payments and monthly interest are rounded. The final payment is adjusted to clear the remaining principal and interest.
Does a lower payment mean a cheaper loan?
Not necessarily. A longer term can lower the monthly payment while increasing total interest.
Educational estimate using the stated assumptions. Fees, taxes, changing rates and individual circumstances can change an outcome. This is not personalized financial advice. Read the estimates disclaimer.