The monthly payment is what fits in your budget, but the total interest is what reveals the true cost of a loan. Use this free loan interest calculator to instantly calculate total interest across your full repayment term.
This tool calculates exactly how much interest you'll pay over the life of your loan. Change any input and the results update instantly.
The amortization formula produces a fixed monthly payment where each payment covers that month's interest first, then reduces the principal. Here is exactly how your $6,929.76 total interest was derived.
Three common loan scenarios calculated with exact numbers. Use these as a reference point, then adjust the calculator above to match your own situation.
Interest is a time-based charge on the outstanding balance. Understanding the mechanics lets you see exactly where every dollar of interest comes from and how to reduce it.
The textbook formula for simple interest charges interest only on the original principal. Simple interest never accrues on prior interest. It only grows with time and the original balance.
Compound interest charges interest on both the principal and any unpaid accumulated interest. The more frequent the compounding, the higher the effective rate rises above the stated APR.
Standard fixed-rate loans use monthly compounding. Each month's interest is calculated against the outstanding balance. Because you pay down the balance every month, the compounding effect is self-limiting.
The amortization formula calculates a fixed monthly payment that fully pays off the loan in exactly n months. As principal falls, the interest portion shrinks and the principal portion grows rapidly.
The table below shows how much interest you pay in each year of the loan. It illustrates the front-loading effect clearly where year 1 costs far more in interest than later years.
| Year | Interest paid | Remaining balance |
|---|---|---|
| 1 | $2,357.08 | $24,971.13 |
| 2 | $1,912.57 | $19,497.75 |
| 3 | $1,428.78 | $13,540.57 |
| 4 | $902.22 | $7,056.84 |
| 5 | $329.11 | $0.00 |
Credit cards and some bridge loans use daily accrual. The Daily Periodic Rate (DPR) is the APR divided by 365. This is structurally more expensive than monthly compounding at the same stated rate.
These four approaches have the highest impact on reducing total loan cost — ranked by the typical dollar savings they produce.
For mortgage-specific analysis including PMI, PITI, and LTV calculations, use the mortgage calculator. For a complete payment-by-payment breakdown, see the amortization calculator.