Transparent method
The formula
Worked example
Example inputs
How to interpret the result
Two installment loans with the identical monthly payment can carry very different total costs once fees and the exact APR are compared, because a payment amount alone doesn't reveal how a lender structured the rate and any upfront charges folded into the offer.
Before you rely on it
What to check
Compare APR and fees across offers with matching payments, not the payment amount alone, since an identical payment can hide a meaningfully different total cost.
The common error
Where people go wrong with installment loan calculator
Comparing installment loan offers by monthly payment alone. Two offers with the identical payment can carry different APRs and fees once fully compared, and the payment alone doesn't reveal which one actually costs less.
Sensitivity evidence
How annual interest rate changes the monthly principal and interest
| Annual interest rate | Monthly principal and interest | Total interest | Total of scheduled payments |
|---|---|---|---|
| 5.0% | $230 | $1,054 | $11,054 |
| 7.0% | $239 | $1,494 | $11,494 |
| 9.0%worked example | $249 | $1,945 | $11,945 |
| 11.0% | $258 | $2,406 | $12,406 |
| 13.0% | $268 | $2,877 | $12,877 |
Every input, tested
Which input moves the monthly principal and interest most
| Input | Tested from | To | Monthly principal and interest at each end | Swing |
|---|---|---|---|---|
| Loan term | 3.0 years | 5.0 years | $318 to $208 | $110 (44%) |
| Loan amount | $9,000 | $11,000 | $224 to $274 | $50 (20%) |
| Annual interest rate | 7.0% | 11.0% | $239 to $258 | $19 (7.6%) |
Two variables at once
Monthly principal and interest by annual interest rate and loan amount
| Annual interest rate \ Loan amount | $8,000 | $10,000 | $12,000 |
|---|---|---|---|
| 5.0% | $184 | $230 | $276 |
| 7.0% | $192 | $239 | $287 |
| 9.0% | $199 | $249 | $299 |
| 11.0% | $207 | $258 | $310 |
| 13.0% | $215 | $268 | $322 |
Step by step
The worked example, input by input
| Input | Value used |
|---|---|
| Loan amount | $10,000 |
| Annual interest rate | 9.0% |
| Loan term | 4.0 years |
| Monthly principal and interest | $249 |
| Total interest | $1,945 |
| Total of scheduled payments | $11,945 |
Complete evidence
Full amortization schedule
Show all 48 rows
| Payment | Opening balance | Principal | Interest | Ending balance |
|---|---|---|---|---|
| Payment 1 | $10,000 | $174 | $75 | $9,826 |
| Payment 2 | $9,826 | $175 | $74 | $9,651 |
| Payment 3 | $9,651 | $176 | $72 | $9,475 |
| Payment 4 | $9,475 | $178 | $71 | $9,297 |
| Payment 5 | $9,297 | $179 | $70 | $9,118 |
| Payment 6 | $9,118 | $180 | $68 | $8,937 |
| Payment 7 | $8,937 | $182 | $67 | $8,755 |
| Payment 8 | $8,755 | $183 | $66 | $8,572 |
| Payment 9 | $8,572 | $185 | $64 | $8,388 |
| Payment 10 | $8,388 | $186 | $63 | $8,202 |
| Payment 11 | $8,202 | $187 | $62 | $8,014 |
| Payment 12 | $8,014 | $189 | $60 | $7,826 |
| Payment 13 | $7,826 | $190 | $59 | $7,635 |
| Payment 14 | $7,635 | $192 | $57 | $7,444 |
| Payment 15 | $7,444 | $193 | $56 | $7,251 |
| Payment 16 | $7,251 | $194 | $54 | $7,056 |
| Payment 17 | $7,056 | $196 | $53 | $6,860 |
| Payment 18 | $6,860 | $197 | $51 | $6,663 |
| Payment 19 | $6,663 | $199 | $50 | $6,464 |
| Payment 20 | $6,464 | $200 | $48 | $6,264 |
| Payment 21 | $6,264 | $202 | $47 | $6,062 |
| Payment 22 | $6,062 | $203 | $45 | $5,858 |
| Payment 23 | $5,858 | $205 | $44 | $5,654 |
| Payment 24 | $5,654 | $206 | $42 | $5,447 |
| Payment 25 | $5,447 | $208 | $41 | $5,239 |
| Payment 26 | $5,239 | $210 | $39 | $5,030 |
| Payment 27 | $5,030 | $211 | $38 | $4,818 |
| Payment 28 | $4,818 | $213 | $36 | $4,606 |
| Payment 29 | $4,606 | $214 | $35 | $4,391 |
| Payment 30 | $4,391 | $216 | $33 | $4,176 |
| Payment 31 | $4,176 | $218 | $31 | $3,958 |
| Payment 32 | $3,958 | $219 | $30 | $3,739 |
| Payment 33 | $3,739 | $221 | $28 | $3,518 |
| Payment 34 | $3,518 | $222 | $26 | $3,296 |
| Payment 35 | $3,296 | $224 | $25 | $3,071 |
| Payment 36 | $3,071 | $226 | $23 | $2,846 |
| Payment 37 | $2,846 | $228 | $21 | $2,618 |
| Payment 38 | $2,618 | $229 | $20 | $2,389 |
| Payment 39 | $2,389 | $231 | $18 | $2,158 |
| Payment 40 | $2,158 | $233 | $16 | $1,925 |
| Payment 41 | $1,925 | $234 | $14 | $1,691 |
| Payment 42 | $1,691 | $236 | $13 | $1,455 |
| Payment 43 | $1,455 | $238 | $11 | $1,217 |
| Payment 44 | $1,217 | $240 | $9.13 | $977 |
| Payment 45 | $977 | $242 | $7.33 | $735 |
| Payment 46 | $735 | $243 | $5.52 | $492 |
| Payment 47 | $492 | $245 | $3.69 | $247 |
| Payment 48 | $247 | $247 | $1.85 | $0.00 |
Where the inputs come from
Use the amount financed, the annual rate stated in the contract and the number of years. Installment loans include personal, auto, furniture and retail financing, and the contract will list the number of payments and the payment amount, which lets you verify the calculation. Enter the rate the contract calls the annual percentage rate only if there are no fees; otherwise use the note rate.
When the result stops applying
Credit insurance, extended warranties and fees added to the contract raise the true cost. Some installment lenders use the Rule of 78s or precomputed interest, which front-loads interest and makes early payoff less beneficial than the standard method used here.
What to compare it with
Installment loans often come bundled with the thing you are buying, so separate the price of the item from the financing. Ask for the cash price, compare with the total of payments, and see whether a bank loan would cost less. If a store offers 0% financing, check whether it comes with a higher price or a deferred-interest clause that adds interest retroactively if the balance is not paid in time. Read the terms on late payments too.
People also ask
Frequently asked questions
What is the difference between installment loans and revolving credit?
An installment loan has a fixed amount, term and payment. Revolving credit, like a card, lets the balance rise and fall.
Does the total of payments equal the amount I owe today?
No. The total of scheduled payments includes interest over the full term, so it exceeds the amount financed by the finance charge. On the example, $10,000 financed at 9% over four years costs about $11,945 in all.
Can I pay off an installment loan early?
Usually, and doing so reduces the interest you pay. Check the contract first for prepayment charges and for precomputed interest, which front-loads the finance charge and can make early payoff save less than the standard method.