Monthly Loan Payment Calculator
First, find your monthly payment using the standard amortization formula M = P[r(1+r)^n] / [(1+r)^n − 1].
How Much Does Compound Interest Cost on a Loan?
The chart below shows what your loan balance would grow to if you made no payments at all — illustrating how quickly compound interest multiplies debt. This is especially important for understanding credit card balances and deferred student loans.
How Loan Compound Interest Works
On most installment loans (personal loans, car loans, mortgages), interest accrues daily on the remaining principal. Each monthly payment covers first the interest that accrued since the last payment, then reduces the principal.
| Loan Type | Typical Rate (2026) | Compounding | Avg. Term |
|---|---|---|---|
| Mortgage (30-yr fixed) | 6.5–7.5% | Monthly | 30 years |
| Auto Loan (new) | 6.0–8.0% | Monthly/Daily | 5–7 years |
| Personal Loan | 10–25% | Monthly | 2–5 years |
| Student Loan (federal) | 5.5–8.0% | Daily | 10–25 years |
| Credit Card | 20–29% | Daily | Revolving |
Credit cards typically compound interest daily at 20–29% APR. A $5,000 balance with no payments becomes $9,552 in just 3 years. Always pay more than the minimum, and prioritize high-rate debt first.
Strategies to Reduce Loan Interest
- Pay extra principal every month. Even $50–$100 extra per payment can cut years off a loan and save thousands in interest.
- Make bi-weekly payments. Paying half your monthly payment every two weeks results in one extra full payment per year, reducing a 30-year mortgage by ~4–5 years.
- Refinance when rates drop. A 1% rate reduction on a $300,000 mortgage saves ~$60,000 over 30 years.
- Never miss a payment. Missed payments on student loans cause interest to capitalize (compound onto principal), permanently increasing what you owe.
- Pay off high-rate debt first (avalanche method). Target credit cards before student loans before mortgages.