How a loan payment is calculated

Most fixed-rate loans use an amortization formula: payment = P × r ÷ (1 − (1 + r)^−n), where P is the amount borrowed, r is the monthly interest rate (annual rate ÷ 12) and n is the number of monthly payments.

The payment schedule shows how each payment is split between principal and interest. At first most of the payment is interest, and over time more goes to principal. Use the Yearly view for a quick summary or the Monthly view for every payment. Enter the rate your lender quotes. A longer term lowers the monthly payment but increases total interest, so compare a few terms before deciding. Fees and insurance are not included.