How amortizing loans work
The payment comes from the standard formula M = P × r ÷ (1 − (1+r)−n) with r the monthly rate and n the number of payments. Each month, interest is charged on the remaining balance first and the rest of your payment reduces principal — so early payments are interest-heavy and the balance falls slowly at first, then faster.
Rate vs term: which lever matters more?
Stretching the term lowers the payment but raises total interest sharply. $20,000 at 8% costs $4,332 in interest over 5 years but $9,119 over 10 — more than double, for a payment that's only $163 lower. If cash flow allows, take the shortest term you can sustain, and treat any "lower monthly payment" pitch as a request to pay more interest.
What counts as a good rate in 2026
Personal loan APRs run roughly 7-12% for excellent credit and 20-36% for poor credit. Before accepting, compare at least three offers (prequalification uses a soft pull and won't hurt your score), and check whether an origination fee of 1-8% is deducted from the amount you receive — that fee is why APR can be well above the quoted interest rate.
How to use this calculator
Enter the amount you actually need to borrow, the APR from a real quote (or a soft-pull prequalification), and the term in months or years. The output gives the monthly payment, total interest, and a year-by-year payoff schedule. To compare two offers fairly, run each one and look at total interest, not just the monthly payment — a lower payment on a longer term almost always costs more overall. If a lender charges an origination fee deducted from the proceeds, borrow enough to cover it or enter the APR (which already includes it) rather than the note rate, so the comparison reflects the real cost of the money.