How to Calculate a Monthly Loan Payment
Updated June 2026
Estimate monthly loan payments.
Before signing for a car or personal loan, it helps to know the monthly payment yourself. Here's the formula and what each piece means.
The formula
M = P × r × (1 + r)n ÷ ((1 + r)n − 1)
- M = monthly payment
- P = loan amount (principal)
- r = monthly interest rate = annual rate ÷ 12
- n = number of monthly payments (years × 12)
Worked example
A $20,000 car loan at 6% for 5 years: r = 0.06 ÷ 12 = 0.005, n = 60. Plugging in gives a payment of about $387/month, and roughly $3,200 in total interest over the loan.
What moves the payment
- Rate — even 1% changes the total cost noticeably.
- Term — a longer term lowers the monthly payment but raises total interest.
- Down payment — reduces P, lowering both payment and interest.
Use the calculator below to try different rates and terms before you commit.
Estimate monthly loan payments.
Frequently asked questions
Does a longer loan term save money?
It lowers the monthly payment but increases the total interest you pay. Shorter terms cost more per month but less overall.
What's the difference between APR and interest rate?
The interest rate is the cost of borrowing the principal; APR also includes certain fees, so it reflects the true yearly cost more fully.