Formula
Monthly payment = P x r(1+r)^n / ((1+r)^n - 1), where P is principal, r is monthly interest rate and n is number of payments.
Example
For a $25,000 loan at 6.5% over 5 years, the scheduled payment is about $489 per month before any fees. Adding extra principal each month reduces the balance faster and can lower total interest.
Common mistakes
Do not compare loans by payment alone. A longer term can make the monthly payment smaller while increasing total interest paid.
How to read the estimate
Start with the scheduled payment, then compare total interest, total cost including fees, and the payoff date if you add extra principal. The first-payment split shows how much of the early payment goes to interest versus reducing the balance.
Limitations
This estimate assumes a fixed rate and equal monthly payments. Upfront fees are added to total cost but not financed into the loan unless you include them in the loan amount. It excludes taxes, insurance, penalties and variable-rate changes.
References
- Consumer Financial Protection Bureau: consumer resources, accessed 2026-05-13.
Last reviewed: 2026-05-14