How loan payments are calculated
For a fixed-rate loan, the monthly payment depends on three things: how much you borrow, the interest rate and the number of months. The calculator uses the standard amortization formula to find the equal payment that pays off the loan by the end of the term, then shows the total interest and total cost.
Balloon loans
Some loans, including certain business, car and commercial real estate loans, end with a large balloon payment. Enter that amount to see how it lowers the monthly payment. The catch is that you must pay or refinance the balloon at the end, which can be risky if rates rise or your credit changes.
Tips before you borrow
- Compare offers by APR, which includes fees, not just the interest rate.
- A shorter term costs more each month but much less in total interest.
- Check for prepayment penalties if you might pay the loan off early.
Frequently asked questions
What is a good interest rate for a loan?
It depends on the loan type, your credit score and current market rates. Get quotes from a few lenders, including a credit union, on the same day to compare.
How much can I borrow?
Lenders look at your income, debts and credit. Many want your total monthly debt payments, including the new loan, to stay under about 36% to 43% of gross income.
Is interest on a personal loan tax-deductible?
Usually not. Mortgage interest, some student loan interest and interest on loans used for a business or investments can be deductible.