This tool functions in two distinct directions. Follow these steps depending on your goal:

Here is exactly how the calculator derived your result. Depending on the mode selected, it either runs a monthly amortization simulation or applies the closed-form annuity formula.

Given a fixed monthly payment, the calculator runs a month-by-month amortization simulation. Each month: interest = balance x (annual rate / 12); principal paid = monthly payment - interest; new balance = old balance - principal paid. This repeats until balance ≤ 0. The total number of iterations is the payoff term in months.

Example: $18,000 auto loan at 7.5%, $400/month payment. Month 1 interest = $112.50; principal paid = $287.50; balance = $17,712.50. By month 52 the balance falls below zero - you're debt-free after 52 payments with about $1,572 in total interest.

This mode uses the standard closed-form amortization formula to return the exact level payment that fully amortizes the balance in exactly n months.

Example: $18,000 at 7.5%, target 36 months. Required payment = $559/month. Total interest = $1,124. Extend to 60 months and the payment drops to $361 - but total interest rises to $1,660.

The most useful application is finding your break-even payment - the lowest payment that keeps the loan term reasonable. Start by entering a low payment in "Time to pay off" mode, then raise it incrementally. You'll see the payoff term shrink rapidly at first, then more slowly once the term is already short. There's a sweet spot where a modest payment increase buys a significant time reduction.

If your proposed payment doesn't exceed the monthly interest (balance x rate / 12), the balance grows every month instead of shrinking. This is common with credit card minimum payments at high APRs. At 24% APR, a $10,000 balance generates $200 in monthly interest. A minimum payment of $200 pays off 0% of the principal.