Loan specifications
Payment type
even total payments
Loan amount
$
Loan term
yrs
mos
Interest rate
%
Compound frequency
monthly
Extra monthly payment
$
Results
Your monthly repayment is $118.7.
Thus, your total repayment amount is $14,244.21, with an interest payment of $4,244.21.
Balances
Display as a
graph and table
In the table, I'd like to see
annual balances
YearYearly PaymentYearly PrincipalYearly InterestBalance
11,424.42698.09726.339,301.91
21,424.42752.29672.138,549.62
31,424.42810.69613.737,738.93
41,424.42873.63550.796,865.3
51,424.42941.45482.975,923.85
61,424.421,014.54409.884,909.31
71,424.421,093.3331.123,816.01
81,424.421,178.17246.252,637.84
91,424.421,269.64154.781,368.2
101,424.421,368.256.220

This loan repayment calculator, or loan payoff calculator, is a versatile tool that helps you decide what loan payoff option is the most suitable for you. Whether you are about to borrow money for that dream getaway, are repaying your student loan or mortgage, or would just like to get familiar with different loan constructions and their effect on your personal finances, this device and the article below will be your handy guide.

In other words, our loan payoff calculator/loan payback calculator can break your loan repayment amount down into its constituent parts (the interest and the principal) for the entire loan repayment time. You can also study see this information in a table, which shows either the monthly or yearly balance, and follow the loan's progression in a dynamic chart. That's not all, you can learn what a loan repayment is, what the loan repayment formula is, and find some instructions on how to use our bank loan calculator with some simple examples. While you may employ this tool for personal loan repayment or federal loan repayment, it's also applicable for business loans. On top of all of this, this tool is also a loan calculator with extra payment, since you can set additional repayments.

Why do people borrow money? - Different types of loans

The first question that comes to mind when talking about loan repayment is usually "why do people borrow money?"

The reasons and motivations for taking a loan are numerous and vast. They range from small things, to buying a car on loan. For some, taking a mortgage is the way they will finally own their own house. Savvy businessmen anticipating a profit might be willing to use loans to finance their next investment. It might sound surprising, but investing money that you don't own is quite common in finance - it is a practice known as leverage. Please note that this option should only be considered when you know your way around the financial market.

In the end, it all boils down to one advantage: taking out a loan allows you instant access to funds you otherwise wouldn't have in exchange for paying it back over time with interest.

Just as there are different reasons to take out a loan, there are as many different kinds of loans, each serving a different need. And for each different type of loan, there is a calculator specialized to help you make sense of it - we have most of them here. If you are explicitly interested in the amount of money you have to pay back, you should check out our loan balance calculator, or if you would like to estimate the interest rate or APR, you can easily employ our interest rate calculator or personal loan calculator. Finally, it is worth noting that the majority of loan structures involve an amortization schedule. If you would like to get more insight into the background of the amortization process, you should visit our amortization calculator.

What is loan repayment?

No matter what reasons you have for taking a loan, one thing is sure - at some point, you will have to return the borrowed money, with interest. Loan payback usually starts right away and happens in equal monthly installments. Depending on the conditions of the loan, the repayment can be deferred for a few months. The process of paying back the loan is called loan repayment. If, at the end of the loan's term, the whole amount is paid back, we can say that the loan is fully amortized. On the other end of the spectrum is a partially amortized loan, where only a part of the sum is returned in monthly payments. Additionally, a lump sum, called a balloon payment, is paid to the bank after a specific interval.

This loan repayment calculator (also known as loan repayment time calculator) is a general use calculator, and can be used to calculate monthly payments and the loan repayment amount left for all the various types of loans. It's a great starting point to learn more about your loan. Whether you need a federal loan repayment calculator, a commercial loan repayment calculator, or simply a personal loan repayment calculator, this tool will help you.

Types of repayment schedules - How to use the payoff calculator?

Most loans are paid off through a series of payments over a specified interval. These payments usually consist of an interest amount, computed on the unpaid balance of the loan, plus a portion of the outstanding balance of the loan, called the principal.

As we mentioned above, you can choose from various type of loans. All of these will have a different interest-principal structure and schedule. To keep it simple, this calculator focuses on the three most common groups of repayment schedules, which we will talk about below. For each repayment option, we give an example in terms of a basic loan offer (which is the default in the calculator itself). It has the following features:

  • Loan amount: $10,000
  • Loan term: 10 years = 120 periods
  • Interest rate: 7.5%
  • Compound frequency: monthly, with no extra repayment
  1. Even total payments

The majority of amortized loans operate with an even total payment schedule, which consists of a decreasing interest payment and an increasing principal payment. The reduced interest amount is balanced by an increasing amount of the principal, so that the total loan payment remains the same over the loan term.

The large unpaid principal balance at the beginning of the loan term means that most of the total repayment is the interest, with only a small portion of the principal being repaid. Since the principal amount is relatively low during the early periods, the unpaid balance of the loan decreases slowly. As the loan payback proceeds over time, the outstanding balance declines, which gradually reduces the interest payments, meaning that there is more room for the principal repayment. Consequently, this increased principal repayment increases the rate the unpaid balance declines at.

If you set the parameters according to the previously mentioned example, you can easily observe how the allocation of the principal and interest changes through the loan term in the table or chart under the main result of the computation.

As the main output shows, the monthly installment of our base loan offer is $118.7 with an even total repayment schedule. While the sum of the interest payments in the first year is $726.33, the principal part is $698.09. In the last year, however, the ratio of the yearly total principal to the interest is reversed: the principal payment increases to $1,368.2, with the interest due merely $56.22.

In this way, the total amount paid over the ten years is $14,244.21, which consists of the $10,000 principal, plus $4,244.21 in interest.

  1. Even principal payment

With the even principal repayment schedule, the amount of the principal is the same in every repayment. It's computed simply by dividing the amount of the original loan by the number of payments (periods). Therefore, the monthly principal in our $10,000 loan example is $10,000 / 120 = $83.33. The amount of the outstanding balance of the loan at each payment period determines the interest payment. Since the unpaid balance decreases with each principal payment, the due interest of each payment also gradually drops. Consequently, this results in a constant decrease in total repayment (principal plus interest).

Relying on our base example, the sum of the total payments is $1,715.63 in the first year, with a relatively high $715.63 interest obligation. In the tenth year, however, the sum of total payment drops to $1,040.63, with a corresponding decrease in the interest to $40.63. The total amount paid over the ten years is $13,781.25, which consists of the $10,000 loan plus $3,781.25 in interest.

  1. Balloon payment

In some cases, you may choose to pay off your loan by a balloon payment at the end of a specified interval (set by the "balloon payment after.." variable. In such a schedule, the last payment equals the remaining balance of the loan plus the corresponding interest computed on the unpaid loan. Note, that before the final payment, the loan repayment structure is similar to the amortized loan with even total payments.

To give an example, if we double the loan term to 20 years in our example, and set the balloon payment to occur the end of the 10th year, the last payment is $6,824.60, with $80.56 in monthly installments. The total repayment amount is $16,453.82, with an interest payment of $6,453.82.

The balloon payment schedule might be a good option for businesses or investors with a limited payoff capacity in the early years, but a good prospect for a robust capability to repay the loan after some years. The long amortization period keeps the payments small in the early periods; the longer the loan term, the lower the monthly payments. Therefore, by setting the length of the loan's term (or in another word the amortization schedule) and the timing of the balloon payments, the loan repayment structure can be tailored to the borrower's preferences.

To get more insight into the characteristics of the above repayment schedules, it might be useful to make a brief comparison. The following table represents the summary of the main features and rounded figures of our base example in the context of the three different scenarios:

Output Even total payments Even principal payment Balloon payment
Loan Term (Amortization term) 10 years 10 years 20 years
Repayment schedule Same as loan term Same as loan term 10 years
Monthly payments Constant, $119 Decreasing from $145 Constant, $81, until the last payment of $6,825
Monthly principal Increasing from $56 Constant, $83 Increasing from $18
Monthly interest Decreasing from $63 Decreasing from $63 Decreasing from $63
Interest to be paid $4,244 $3,781 $6,454

As you can see, the lowest interest payment occurs with the even principal repayment structure, which is the result of paying back more of the principal in the early monthly payments.

Logically, the best way to reduce the borrowing cost of the loan and shorten the loan repayment time is to increase the monthly installments. Any extra payment to the minimum monthly payment set by the amortization schedule directly contributes to the higher principal allocation; thus, a faster decrease in the remaining principal balance. As we have seen, a more rapid fall in the unpaid balance can lead to a significant drop in the interest, which is the prominent cost of borrowing. With our tool, you can easily study the effect of such additional payments by providing an "Extra monthly repayment".

How to calculate loan repayments - formula?

If you would like to get some insight into the computational background of this calculator, there are some useful formulas that you can use to estimate the monthly repayment on your own. To keep it simple, here we present the two basic loan repayment formulas applied at the even total payment amortized loans with no additional repayments.

  • Monthly repayment formula

P = (A * i * (1 + i)t)) / ((1 + i)t - 1)

  • Unpaid balance formula

B = A * ((1 + i)t) - P / i * ((1 + i)t - 1)

Where

  • P - Monthly payment amount
  • A - Loan repayment amount
  • i - Periodic interest rate
  • t - Number of periods
  • B - Unpaid balance

Disclaimer

The results of this calculator, due to rounding, should be considered as just a close approximation financially. For this reason, and also because of possible shortcomings, the calculator is created for advisory purposes only.

Tibor Pal, PhD candidate