How to Calculate Loan Repayment And Interest

Repayment is defined as the act of paying back money previously borrowed from a lender. Typically, the return of money happens through periodic payments, which include interest and principal. The principal is the original sum of money borrowed in a loan.

On the other hand, interest is charged for the privilege of borrowing money; a person who borrows must pay interest for the ability to use the money released to them through the loan. Loans can also be fully paid in a lump sum at any time, though the most contract may include an early repayment fee.

In this article, we will discuss what a loan repayment is, how to calculate loan repayment, how to calculate loan repayment and interest rate, and the best loan repayment calculator.

How to calculate loan repayment

What is a loan repayment?

A loan is the funds or cash received from a financial institution or a bank in exchange for an agreement to repay the principal amount with interest on top. Loan repayment can be defined as settling money borrowed from a lender (a person or a financial establishment) along with the agreed interest rate. It is a structured way of repaying funds loaned to a business, an individual, or a government over an extended period or a standard period alongside an agreed interest payment.

Loan repayment occurs through EMIs (equated monthly installments). These said installments are the monthly money repaid to the lender (bank or financial institution). The installments are made up of the principal and interest on the principal, which is paid to the lender on the agreed date each month until the total money is paid up.

How to calculate a loan repayment schedule

The act of repaying a loan through a series of scheduled payments referred to as EMIs (equated monthly installments) that includes both the principal amount and the interest component, which is known as the Repayment Schedule, which can also be called an Amortization Table.

The loan payment formula is a bit difficult for borrowers who don’t like dealing with figures. It looks like a complex mathematical formula. To calculate loan repayment, starting in month one, take the total amount of the loan to be paid and multiply it by the interest rate agreed on the loan.

Then to calculate a loan with monthly repayments, divide the result by 12 (twelve) to get the monthly interest. Subtract the monthly interest from the total monthly payment, and the remainder (remaining amount) goes toward the principal.

How to calculate a loan repayment manually.

If an individual has a fixed-rate loan, then calculating their monthly payment is easy: they have to multiply the amount they borrowed by the monthly interest rate. For example, if they borrowed 3,000 dollars at 6 percent (%), their monthly payment would be 180 dollars ($) ($3000 x 0.06).

How to calculate a loan repayment in math

Personal or auto loans won’t have the same calculations as student loans. Different loans come with different requirements. Here’s how to use loan calculators based on the loan type.

Mortgage calculator

A mortgage calculator uses an individual’s principal loan amount, their monthly interest rate, and the number of monthly payments they will make over the length of the loan to determine what the installment payments will be every month.

This type of calculator can help people determine how much house they can afford. Working through these calculations can help people decide whether or not they need a more significant down payment for their home purchase to help reduce the monthly payment amount.

  • Home equity loan calculator

If people need to take out a home equity loan, they first need to see how much they can borrow with a home equity loan calculator. All they have to do is enter their address, the estimated value of their home, their estimated mortgage balance, and their credit score. Even though their available home equity is a significant part of how much they can borrow through a home equity loan, their credit score also factors into the loan amount and their interest rate.

  • Home equity line of credit calculator

The payment amount for each month for a Home equity line of credit calculator varies based on how much people borrow from their revolving line of credit. Still, some calculators can tell them how much of a monthly payment they need to make to pay off the debt on a timeline.

Using the calculator requires knowing the amount the interest rate changes per year, HELOC’s current balance, interest rate (APR), and any annual fees or additional charges. Using the information, Home equity line of credit calculator payoff calculators can provide a specific repayment timeline, and the amount people would need to pay monthly to meet that timeline.

  • Personal loan calculator

A personal loan calculator takes an individual principal balance, repayment term length, and interest rate and gives them a monthly payment amount due for each month.

Some simple personal loans will work with this type of calculator. Still, people can also use a more detailed loan payment calculator if they have specific calculations, such as making additional principal payments that will affect the length of their loan and the amount of interest they pay.

You can learn more from the video below:

  • Student loan calculator

If an individual is trying to figure out some essential details about student loan repayment, they can use a student loan calculator. When people put in their loan amount and interest rate and enter different loan terms, the calculator can help them determine how much they will need to pay each month to pay their student loan off early. They can see how extra monthly payments, yearly payments, or one-time extra payment would impact their total loan repayment.

  • Auto loan calculator

Before an individual settle on taking out a car loan at the dealership, they can do their homework with an auto loan calculator first. An auto loan calculator will ask for their desired loan amount, interest rate, repayment term, and whether they want a used or new car. Auto loans may have shorter terms than home equity or personal loans, so people can compare how different terms affect their monthly payments.

How to calculate loan repayment and interest rate

Divide the interest rate by the number of payments they will make that year. If they have a 6 percent (%) interest rate and make monthly payments, they will divide 0.06 by 12 (twelve) to get 0.005. Multiply that number by their remaining loan balance to determine how much they will pay in interest that month.

The best loan repayment calculator to assist you in calculating your loan repayment

The Bankrate loan repayment calculator will help people determine what they might pay each month on their loan and the overall interest incurred. The calculator can also help them determine line payment options and rates. People looking for loan payment information should click on “fixed term loan” in the “Payment option.” If they want a line of credit payment information, they should choose 2 percent (%), 1.5 percent (%), 1 percent (%) of balance, or 100 percent (%) of interest owed.

People should always calculate their potential monthly payment to know if they can afford it before applying for a loan. Also, they should ensure they understand the terms of their repayment process, especially if they want to take out a loan.


Calculating loan repayments is simple, and it’s something that people can do on their own. With a bit of hard work, they will be able to see exactly how much it will cost them to pay off any loan, so now that they know how to calculate loan payments, it’s time to go out to the world and make some smart financial decisions.


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