Loan calculator

The payment uses the standard amortisation formula P × r ÷ (1 − (1 + r)^−n), where P is the amount borrowed, r is the annual rate divided by 12 and n is the number of monthly payments. For $20,000 at 6% over 5 years, r is 0.005 and n is 60, which gives $386.66 a month and $3,199.36 of interest in total.

With a fixed payment every instalment is the same, but early payments are mostly interest. With equal principal you repay the same slice of principal each month plus interest on what is still owed, so the first payment is the highest and each one after it is smaller. Equal principal costs less interest overall because the balance falls faster.

You pay only the interest each month (amount × monthly rate) and repay the whole principal in one lump sum at the end of the term. The monthly figure is the lowest, but the total interest is the highest of the three methods because the balance never shrinks. The total paid shown includes that final principal repayment.

With a 0% rate the amortisation formula would divide by zero, so the calculator simply splits the amount evenly: the monthly payment is the amount divided by the number of months and the total interest is zero. That matches interest-free promotional financing and the same rule applies to the other two methods.

No. The calculator covers principal and interest only, assuming a nominal annual rate divided by 12 and charged monthly. Origination fees, mortgage insurance, property taxes and early-repayment charges are not included, so the instalment quoted by your lender can differ slightly from the figure shown here.