Payment Calculator
With amount borrowed 25000 usd, annual rate 7.5 percent, term, years 5, or pay this much a month instead 600 usd, payment comes to $500.95 — monthly payment. It is reached in 7 steps, the last of which is 25000 * 0.00625 / (1 - pow(1 + 0.00625, -60)), and each one is printed on the page with its numbers filled in. The formula is the one published by 12 CFR part 1026 (Regulation Z), not an approximation fitted to it.
The monthly payment on a loan, and how much sooner it clears if you pay a different amount instead.
Formula and sources checked · How we check
Amount borrowed 25000, Annual rate 7.5, Term, years 5, Or pay this much a month instead 600
$500.95
Monthly payment for the example below. Editing a field recomputes the calculator below; this figure holds the answer the page was loaded with.
It is written into the HTML rather than drawn by a script, so a search engine reading this page without running JavaScript still finds an answer.
- Monthly payment
25000 * 0.00625 / (1 - pow(1 + 0.00625, -60))$500.95- Paid over the full term
500.94871 * 60$30,057- Interest over the full term
30056.923 - 25000$5,057- Months at that payment
-log(1 - 0.00625 * 25000 / 600) / log(1 + 0.00625)48.418- Months sooner than the schedule
max(0, 60 - 48.417608)11.582- Interest at that payment
600 * 48.417608 - 25000$4,051- Interest saved
max(0, 5056.9229 - 4050.5647)$1,006
Worked example
$25,000 at 7.5% over five years is $500.95 a month and $5,056.92 of interest. Paying $600 instead clears it in 48.4 months rather than 60 — a year sooner, for about $99 a month, and $1,006 less interest.
How to work it out yourself
- 1.Enter the amount borrowed, the rate and the term the lender is offering.
- 2.To test a bigger payment, put it in the last field. The months and the interest at that payment appear in the working.
- 3.A payment at or below one month’s interest never clears the loan at all — the calculator reports zero months rather than a number, because there is no answer to report.
The formula
- Monthly payment
25000 * 0.00625 / (1 - pow(1 + 0.00625, -60)) - Paid over the full term
500.94871 * 60 - Interest over the full term
30056.923 - 25000 - Months at that payment
-log(1 - 0.00625 * 25000 / 600) / log(1 + 0.00625) - Months sooner than the schedule
max(0, 60 - 48.417608) - Interest at that payment
600 * 48.417608 - 25000 - Interest saved
max(0, 5056.9229 - 4050.5647)
Source: 12 CFR part 1026 (Regulation Z) — Truth in Lending, US SEC Investor.gov — compound interest and loan mechanics
Questions people actually ask
- Why does paying a little extra clear the loan so much sooner?
- Because every extra dollar goes entirely to principal, and principal that is gone stops generating interest for the rest of the term. On the example above, $99 more a month — under 20% extra — removes nearly a fifth of the total interest and almost a year of payments. The effect is largest early, when the balance is high and interest is most of the payment.
- What happens if I pay only the interest?
- The balance never moves. A payment equal to one month’s interest leaves exactly the same amount owing next month, and anything below it makes the debt grow. That is why this calculator reports zero months rather than a large number: the loan does not take a long time to clear, it does not clear.
- Is my payment the same every month?
- On a fixed-rate amortising loan, yes — but what it consists of changes every month. Early payments are mostly interest and late ones are mostly principal, which is why the balance falls slowly at first. The amortisation schedule shows that split month by month.
- Does the lender have to accept extra payments?
- For most consumer loans made since 2014 there is no prepayment penalty on a mortgage that would have to be disclosed under Regulation Z, but some auto and personal loans still carry one, and precomputed-interest loans do not credit early payment at all. Check the note before assuming a bigger payment shortens the loan.
- Should I pay off the loan or invest instead?
- Compare the loan rate against what the money would earn after tax, and remember that clearing a debt is a certain return while an investment is not. A 7.5% loan is a guaranteed 7.5%; almost nothing else is. Where the loan rate is very low — an old mortgage, a subsidised student loan — the arithmetic can go the other way.
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