In short
A loan calculator shows the fixed monthly payment needed to repay a loan over a set term, and how much of what you pay goes to interest. In many countries this payment is called an EMI (equated monthly instalment).
How the monthly payment is calculated
Most personal loans, car loans and mortgages are "amortising" loans: you pay the same amount every month, and each payment covers that month's interest plus a slice of the amount you borrowed (the principal).
The standard formula is: payment = P × r × (1 + r)^n ÷ ((1 + r)^n − 1), where P is the amount borrowed, r is the monthly interest rate (the annual rate divided by 12) and n is the number of monthly payments.
Worked example
Borrow 250,000 at 7.5% a year for 20 years. The monthly rate is 7.5 ÷ 12 = 0.625%, and there are 240 payments.
The monthly payment comes to about 2,013.98. Over 20 years you pay 483,355.92 in total, of which 233,355.92 is interest: almost as much as the original loan.
In the first month, 1,562.50 of the payment is interest and only 451.48 reduces the balance. That balance shrinks faster every month, so later payments go mostly towards principal.
Why early payments are mostly interest
Interest is charged on the balance you still owe. At the start the balance is at its highest, so the interest part of each payment is at its highest too. As the balance falls, more of each payment goes to principal. The repayment schedule above shows this shift year by year.
Ways to pay less interest
Choose a shorter term: the monthly payment rises, but total interest falls sharply.
Compare interest rates: even half a percentage point makes a large difference over many years.
Borrow less: a bigger down payment reduces both the payment and the interest.
Make extra payments when you can: money paid early reduces the balance that interest is charged on. Check first whether your lender charges a fee for prepayment.
Frequently asked questions
What is an EMI?
EMI stands for equated monthly instalment. It is the fixed amount you pay every month until a loan is repaid, and it includes both interest and principal. It is the same thing as the monthly payment shown by this calculator.
Does the result include fees, insurance or taxes?
No. The calculator covers principal and interest only. Lenders may add processing fees, insurance or taxes, so your actual payment can be higher. Ask your lender for the full cost, often shown as the APR.
What if my interest rate is variable?
The calculator assumes a fixed rate for the whole term. With a variable rate your payment will change when the rate changes. You can enter different rates to see how much your payment could move.
Is the information I enter stored anywhere?
No. All calculations happen in your browser. Nothing you type is sent to Numflo or stored on a server.
Methodology
Results use the standard amortisation formula with monthly compounding and a fixed interest rate. Values are rounded for display only; calculations use full precision.
This calculator gives estimates for information only and is not financial advice. Actual loan terms depend on your lender.
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