Compare loan terms
The same loan repaid over different terms. A longer term lowers the monthly payment but costs more interest, which is how the CFPB suggests comparing offers.
| Term | Monthly payment | Total interest |
|---|---|---|
| 1 yearYours | $888.02 | $656.23 |
| 2 yearsYours | $470.27 | $1,286.45 |
| 3 yearsYours | $331.67 | $1,939.90 |
| 4 yearsYours | $262.85 | $2,616.62 |
| 5 yearsYours | $221.94 | $3,316.36 |
| 7 yearsYours | $175.99 | $4,783.58 |
| 10 yearsYours | $142.89 | $7,147.66 |
Source CFPB · How do I compare loan offers? ↗
How to calculate a loan payment
Lenders use a standard formula, the same one as Excel's PMT function. To find how much you can borrow, the formula is turned around (Excel's PV function).
Here it is with your numbers:
- Loan amount (P): $10,000.00.
- Monthly interest rate (r): 11.9% ÷ 12 = 0.009917.
- Number of monthly payments (n): 2 years × 12 = 24.
- Put them into the formula: $10,000.00 × 0.009917 ÷ (1 − 1.009917^−24) = $470.27.
It means your 24 monthly payments add up to $11,286.45: the $10,000.00 you borrow plus $1,286.45 of interest.
Source Microsoft Support · PMT function ↗Microsoft Support · PV function ↗
Interest rate or annual percentage rate (APR)?
The interest rate is what the lender charges for the money. The annual percentage rate (APR) is the interest rate plus the lender's fees, such as an origination charge. Lenders must show you the APR, so use it to compare offers, but always compare an APR with an APR, not with an interest rate. For the payment, use the interest rate on your loan offer.
Source CFPB · Loan interest rate vs APR ↗
Year by year
Each payment covers that month's interest first and the rest pays down the loan, so early payments are mostly interest and later ones mostly principal.
| Year | Interest paid | Balance at year end |
|---|---|---|
| 1 | $938.92 | $5,295.68 |
| 2 | $347.53 | $0.00 |
Source CFPB · What is amortization? ↗
FAQs
How do I calculate the monthly payment on a loan?
Lenders use the loan amount, the monthly interest rate (the yearly rate ÷ 12) and the number of payments in M = P × r ÷ (1 − (1 + r)^−n). It is the same formula as Excel’s PMT function: $10,000 at 8% over 10 months is $1,037.03 a month.
How much is a monthly payment for a $10,000 loan?
It depends on the rate and the term. At 11.9%, the average rate on 24-month personal loans at banks, it is $470.27 a month over 2 years or $221.94 over 5 years.
Source Federal Reserve · Consumer Credit G.19 (personal loan rates) ↗
How much would a $20,000 loan cost per month?
At 11.9% over 5 years, $443.88 a month, and you would pay $6,632.76 in interest. A shorter term costs more each month but less in interest; the table above compares terms.
What is the monthly payment on a $400,000 loan at 7%?
Over 30 years, $2,661.21 a month in principal and interest. A mortgage adds property tax and insurance on top, which our mortgage calculator includes.
Sources
- Microsoft Support: PMT function
- Microsoft Support: PV function
- CFPB: Loan interest rate vs APR
- CFPB: What is amortization?
- CFPB: How do I compare loan offers?
- Federal Reserve: Consumer Credit G.19 (personal loan rates)