How To Calculate Payment On A Loan – An Easy Guide

There are lots of ways you can carry out calculations of a loan collected whether personal or for business uses. You can either use the Interest only loan payment calculation method or the Amortization payment calculation method to calculate the payment you will have to make for any borrowed loan. 

Photo credit:

How Personal Loan Payments Work

Personal loans have different parts and they are broken down into bits. A personal loan has a principal and the principal amount is usually referred to as the initial amount being borrowed, for example, a $100,000 loan borrowed for personal use.

It also involves an interest fee added to the principal amount borrowed. It is usually small but it is required to be paid alongside the initial amount collected as a loan.

Loan Payments Formulas

There are two main different payment formulas you can use to calculate the payment on a loan to ensure accuracy and they include the Interest only loan payment formula and the Amortization loan payment formula.

Both formulas usually involve multiplying the principal loan amount with the rate incurred and then dividing the result by the duration involved for repayment of the loan.

Best Auto Loan Calculator

Several calculators can be used to calculate loan payments if you want to derive the actual monthly payment of a loan. Below are some of the calculators you can use for calculating loan payments. 

Personal Loan Calculator

Is the best loan calculator you can use to derive the actual payment for a loan. It can easily be used for loan calculations without providing estimated results and that is why it is highly recommended for anyone who wants to calculate the payment for any loan whether for personal use or business. 

Mortgage Calculator

This is also a highly recommendable loan calculator you can use for making the right loan calculations. Mortgage calculators work well with your loan payment, the rate incurred on the loan, and the months required for the loan lifetime.

It helps to provide you with the total amount you need to pay monthly for the loan borrowed. If you are looking for a good calculator to check out your loan payments then Mortgage calculators are recommended. 

Read Also:

When Are Loans a Good Option to Use?

10 Apps That Let You Borrow Money Instantly In UK 2022

How To Borrow $100 With Bad Credit


What Is The Formula for Calculating Payments? 

The monthly payment formula is simply used to calculate how much will be paid for a loan every month including loan principal and interest. Below is the formula for calculating loan payments using the interest-only loan payment method. 

Suppose you borrow a loan of $100,000 to pay within 30 years at an interest rate of 6%, this is how to calculate the monthly loan payment. 

a: $100,000 (Initial amount of loan).

r: 0.06 (6% interest rate on loan).

n: 1/12 ( Based on monthly payments).

So, therefore; a*r*n (100,000 * 0.06 * 1/12) = $500. 

In this case, $500 is the monthly payment for the loan of $100,000. 

How Do You Calculate Monthly Payment With Interest? 

To do that you can just simply use the Interest only loan payment formula which involves multiplying the principal amount by the interest rate of the loan and dividing the result by the loan period to get the actual monthly payment. Use the above example, for understanding. 

What Is 6% on a $30,000 Loan? 

Suppose you borrowed a loan worth $30,000 and the interest rate is staked at 6% then the interest amount will be $1,800. You can find out using the Interest only loan payment method. 

a: $30,000 (Initial amount of loan).

r: 0.06 ( 6% interest rate). 

So, therefore; a*r (30,000 * 0.06) = 1,800

In this case, 6% interest on a $30,000 loan is $1,800. 

How Much Would a $25,000 Car Loan Cost Per Month? 

Now, it all depends on the interest rate added to it and the time duration for the repayment of the loan. Well, let’s say, for example, you borrowed a $25,000 car loan at 5% interest to be paid in 12 months. Then using the Interest only loan payment method over $104 will be paid monthly. 

a: $25,000 (Initial amount of loan).

r: 0.05 ( 5% Interest rates loan).

n: 12 (Based on monthly payment).

So, therefore ; (25,000 * 0.05 * 12) = $104. 1666 or $104.2 per month. 

How Hard Is It to Get a $30,000 Personal Loan? 

It can be a little bit difficult to get a $30,000 personal loan for use only if you meet up with the loan requirements. Most loans whether for business or personal uses come with lots of requirements and only when you adhere to the policies can you sign up for the loan for yourself. 

Is It Better to Pay Off Car Loans Early? 

Of course, it is better to pay off car loans early between the time of agreement to avoid embarrassment. If you have the money to pay back the loan even before the agreed-upon time you can also do so to improve your chances of getting a loan in the future. 

What Car Can I Afford With My Salary? 

Before buying a car it is very important to know the cost and the maintenance required for it. Get to know if your salary would be enough to buy the car and also maintain it. If not it is advised to go for a car with less cost of maintenance. 

What Is Considered a High Car Payment? 

A high car payment is a payment that is considered to be above 30% of your total income and this is said to be expensive since the car payment is not the only expense you should also consider buying fuel and the cost of maintenance. 


It is very important to know how to use calculators in calculating your loan payments to be able to realize how much money you need for loan repayment.

Calculating loans also help to save you from cases of debt and making wrong choices as it provides you with all the necessary information needed to keep a record for every loan burrowed.

About Author

Carlos James
I am a creative writer, researcher and strategic digital marketer who is focused on providing value to the community through my contents and creatives.

Get Latest Market Updates!

Enter your name & email to get started!

We don’t spam! Read our privacy policy for more info.

Sharing is caring...

Leave a Comment