How the monthly payment is calculated
Most personal loans, car finance and mortgages are repaid in equal monthly instalments, known as an annuity. The payment is the same every month, but what it pays for changes: early on most of it is interest, towards the end most of it is principal. This loan repayment calculator uses the standard formula:
M = P × r / (1 − (1 + r)−n)
M is the monthly payment, P the amount borrowed, r the monthly interest rate (the annual rate divided by 12) and n the number of monthly payments. Each month's interest is the outstanding balance × r; the rest of the payment reduces the balance, so next month's interest is a little smaller.
All the calculator needs are three numbers from a loan offer or agreement: the amount, the interest rate and the term. It works the same way for a personal loan, car finance or a mortgage.
How to read the result
- Per month — the payment to plan for in your budget. With declining payments it is the first month's payment; each one after it is slightly smaller.
- Total interest — what the whole term costs on top of the amount borrowed. This is the figure that overpayments and a shorter term bring down.
- Total repaid — the amount borrowed plus all the interest.
- The chart shows the balance shrinking month by month; the green dashed line shows it with your overpayment. The repayment schedule below it splits each year into principal and interest.
Worked example: €15,000 over 5 years at 8%
The monthly rate is 8% / 12 ≈ 0.667%, and there are 60 payments. Put into the formula, the monthly payment is €304.15.
- In the first month the interest is €15,000 × 0.667% = €100.00, and €204.15 goes towards the balance.
- Over five years you pay €3,248.75 in interest, so the loan costs €18,248.75 in total.
- Overpay by €50 every month and the loan ends 10 months sooner (after 50 months), and you save €564.13 in interest.
These numbers are already loaded in the calculator above — change any of them and the result updates instantly.
Equal or declining payments
With declining payments the principal falls by the same amount each month (P / n) and interest is charged on what is left, so the first payment is the largest and each one after it is slightly smaller. The same example both ways:
| Equal (annuity) | Declining | |
|---|---|---|
| First payment | €304.15 | €350.00 |
| Last payment | €304.15 | €251.67 |
| Total interest | €3,248.75 | €3,050.00 |
| Budgeting | One figure for the whole term | Larger payments at the start |
Declining payments mean less interest overall, because the balance shrinks faster. Equal payments give a predictable monthly budget. Switch between the two in the calculator to compare them with your own numbers.
How to reduce the total interest
- Overpay every month. Every extra euro reduces the balance, and all later interest is charged on a smaller amount. In the example, €50 a month takes 10 months off the loan. The calculator shows the version where the payment stays the same and the loan ends sooner.
- Choose a shorter term. The same loan over 3 years costs €470.05 a month and €1,921.64 in interest in total — you save €1,327.12 compared with five years.
- Borrow a smaller amount. A bigger deposit means interest is charged on a smaller amount from day one.
- Compare the APR. Between offers, compare the APR (annual percentage rate), which also includes arrangement fees and the other costs of the loan.
- Refinance at a lower rate. If another lender offers a lower APR, an existing loan can be refinanced. Enter the remaining balance and the new rate in the calculator and compare the interest with your current schedule.
Several loans: Avalanche or Snowball
With several loans you can send all your extra money to one loan at a time. The Avalanche method clears the highest interest rate first, which means the least interest overall. The Snowball method clears the smallest balance first, so the first loan closes sooner and its payment rolls over to the next one. Groworth works out both orders for you: add your loans, and the Debts screen shows the day you are debt-free and which loan comes next in your chosen order. Compare both orders with your own numbers in the debt payoff calculator.
Frequently asked questions
What is the difference between the interest rate and the APR?
The interest rate is the yearly price of the money itself, and it is what the payment formula uses. The APR (annual percentage rate) also includes arrangement fees and other required costs, which makes it the better figure for comparing offers. Enter the interest rate from your loan agreement in the calculator.
Can I repay a loan early?
Yes. Under EU consumer credit rules you can repay a consumer loan early, in full or in part, at any time, and you pay interest only for the time you actually borrowed. The lender may ask for compensation for early repayment, which the law caps; your loan agreement sets out the exact terms.
What does an overpayment change?
An overpayment goes straight to the principal. Depending on the agreement it shortens the term or lowers the monthly payment; this calculator shows the first case — the same payment and an earlier end date.
How accurate is this calculation?
With a fixed rate it is mathematically exact to the cent. With a variable rate (for example EURIBOR plus a margin) the payment moves with the rate, and the calculator shows the picture at today's rate.
Why might my lender's schedule differ slightly?
Lenders may round payments, charge interest on the actual number of days in each month, or add monthly fees and insurance. The calculator shows the loan itself: principal and interest.
What happens to the numbers I enter?
The whole calculation runs in your browser, and the amounts you enter stay on your device.