Loan payment formula
Most term loans are fully amortizing: each monthly payment is the same, but the share going to interest falls over time while the share paying down principal rises.
Payment = P × r ÷ (1 − (1 + r)−n)
where P = loan amount, r = APR ÷ 12 ÷ 100, n = number of monthly payments
where P = loan amount, r = APR ÷ 12 ÷ 100, n = number of monthly payments
Example
A $50,000 equipment loan at 9.5% APR over 5 years (60 payments) costs about $1,050.09 per month, or roughly $13,005 in total interest.
Before you borrow
- Compare the APR including origination fees, not just the headline rate.
- Merchant cash advances and some online loans quote a factor rate instead of an APR. Their effective APR is often far higher.
- Check for prepayment penalties if you might pay the loan off early.
FAQs
Does this work for SBA loans?
Yes for standard SBA 7(a) and 504 term loans with fixed rates. Variable-rate loans will change as the base rate moves.
What about a 0% interest loan?
Enter 0 for the rate and the payment is simply the loan amount divided by the number of months.
Does the payment include fees?
No. Add any financed fees to the loan amount to include them.