Loan Interest Calculator
Calculate total interest paid on any loan and compare simple vs compound interest.
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Frequently Asked Questions
What is the difference between APR and interest rate?
The interest rate is the cost of borrowing the principal only. APR (Annual Percentage Rate) includes the interest rate plus fees (origination fees, closing costs, etc.) expressed as a yearly rate. APR is always equal to or higher than the interest rate. When comparing loan offers always compare APRs, not just interest rates, for a true apples-to-apples comparison.
How does compound interest work on a loan?
On an amortizing loan (mortgage, car loan, personal loan), interest compounds monthly. Each payment covers that month interest first, then the remainder reduces the principal. Early in the loan, most of each payment is interest. As the balance decreases, more goes to principal. This is why extra early payments are so powerful — they reduce the principal that future interest is calculated on.
What factors most affect total interest paid?
The three biggest factors in order of impact: (1) Interest rate — a 1% rate difference on a $200,000 mortgage over 30 years changes total interest by $40,000+. (2) Loan term — a 30-year vs 15-year mortgage at the same rate roughly doubles total interest paid. (3) Loan amount — every dollar borrowed costs more than a dollar to repay. A larger down payment saves disproportionately in total interest.
Total interest paid by loan size, term and rate
Interest on an amortizing loan depends on three things: the amount, the rate and how long you take to repay it. The first table holds the rate at 7% and shows how the term multiplies the cost. The second holds a $300,000, 30 year loan and shows what each half point of rate is worth.
| Amount at 7% | 3 years | 5 years | 10 years | 15 years | 30 years |
|---|---|---|---|---|---|
| $10,000 | $1,116 | $1,881 | $3,933 | $6,179 | $13,951 |
| $25,000 | $2,789 | $4,702 | $9,833 | $15,447 | $34,877 |
| $50,000 | $5,579 | $9,404 | $19,665 | $30,895 | $69,754 |
| $100,000 | $11,158 | $18,807 | $39,330 | $61,789 | $139,509 |
| $300,000 | $33,473 | $56,422 | $117,991 | $185,367 | $418,527 |
Total interest over the full term, fixed rate, monthly payments, no extra payments.
| $300,000 over 30 years | Monthly payment | Total interest |
|---|---|---|
| 5.0% | $1,610.46 | $279,767 |
| 5.5% | $1,703.37 | $313,212 |
| 6.0% | $1,798.65 | $347,515 |
| 6.5% | $1,896.20 | $382,633 |
| 7.0% | $1,995.91 | $418,527 |
| 7.5% | $2,097.64 | $455,152 |
| 8.0% | $2,201.29 | $492,466 |
Each half point on a $300,000 mortgage is worth $33,000 to $37,000 over 30 years, or about $95 to $104 a month.
Worked example: $25,000 over 5 years at 7%
Monthly rate 0.5833%, 60 payments. Payment = 25,000 x 0.005833 x 1.4176 / 0.4176 = $495.03. Total paid = 60 x 495.03 = $29,702, so interest = $4,702. The same loan over 3 years costs $2,789 in interest with a $771.93 payment; over 10 years, $9,833 with a $290.27 payment. The 10 year option costs 3.5 times the interest of the 3 year option for a payment that is $482 lower.
Why interest is not rate times amount times years
People estimate $25,000 x 7% x 5 = $8,750. The real figure is $4,702 because the balance falls every month and interest is charged only on what is still owed. The average balance over the loan is roughly half the original amount, so a rough estimate is rate x amount x years / 2, which gives $4,375 here. For 30 year mortgages the approximation is worse because the balance stays high for years: the shortcut gives $315,000 on the $300,000 example at 7%, against a true $418,527.
Interest already paid when you refinance or sell
The interest on a loan is front-loaded. On the $300,000, 30 year loan at 7%, you have paid $102,149 in interest by the end of year five and reduced the balance by only $17,605. A refinance at that point restarts a new 30 year schedule on $282,395, and the first years of the new loan are again mostly interest. Refinancing makes sense when the rate drop is large (a point or more), you keep the loan long enough to recover closing costs, and you choose a term no longer than what remained on the old loan.
Fixed versus variable
The tables assume a fixed rate. On a variable rate loan (most credit cards, HELOCs, some student loans) the interest is recalculated as the index moves, so total interest cannot be known in advance. Run the calculator above at the current rate and again at two points higher to see the range you are exposed to.