What fixed monthly payment amortises a loan over the entered term?

An amortising payment covers the period’s interest and reduces principal so the balance reaches zero at the end of the term. Early payments contain more interest because the outstanding balance is larger.

Building a level amortising payment

Loan amount, annual interest rate and term are converted into a fixed monthly amortising payment. The annual rate is divided by 12 and the term is converted to months.

Total paid multiplies the monthly payment by the number of months, and total interest subtracts the original principal. Fees, insurance and variable-rate changes are not included.

One fixed-rate loan schedule

The default case converts the annual rate and term to monthly values, calculates the level payment and totals those payments across the loan.

Monthly payment$1,535.22
Total interest$210,565.62
Total paid$460,565.62
Interest as share of loan84.23%

Lower payment can mean higher lifetime interest

Monthly payment describes cash flow; total interest describes borrowing cost over time. Extending the term commonly lowers the payment while raising total interest.

Monthly rate and number of payments

i = Annual rate ÷ 100 ÷ 12n = Years × 12Payment = Principal × i ÷ [1 − (1 + i)⁻ⁿ]Total interest = Payment × n − Principal

Charges outside principal and interest

A quoted lender payment may include insurance, taxes or fees. Compare only the principal-and-interest portion with this formula.

  • The rate is fixed and payments are made monthly on schedule.
  • The loan is fully amortising with no balloon payment.
  • Origination fees, insurance, taxes and penalties are excluded.

Calculations related to loan payment

The following tools examine neighbouring parts of the same calculation without changing the inputs or assumptions used above.

Quick answers

Frequently asked questions

Does the monthly loan payment include fees or insurance?

No. It includes principal and interest from the entered fixed rate only.

What happens when the interest rate is zero?

The payment is the loan principal divided evenly across the term.

Why does a longer loan term increase total interest?

More monthly periods allow interest to accrue for longer even though the monthly payment may be lower.

Educational content only. This guide is not financial advice.