What This Calculator Does
The Total Cost of Loan Calculator shows the full price you pay for borrowing money — not just the monthly payment, but every dollar handed over across the life of the loan. For an amortizing fixed-rate loan (mortgage, car loan, personal loan), it computes the level monthly payment, multiplies it by the number of payments, and reveals how much of that total is pure interest.
How to Use It
Enter three numbers: the loan amount (principal you borrow), the annual interest rate as a percentage, and the loan term in years. The calculator converts the rate to a monthly figure and the term to a number of monthly payments, then returns the total cost, total interest, and monthly payment.
The Formula Explained
The standard amortization payment is \( \text{PMT} = P \cdot i / (1 - (1+i)^{-n}) \), where \(P\) is the principal, \(i\) is the monthly rate (annual rate ÷ 12 ÷ 100), and \(n\) is the number of months. Multiply that payment by \(n\) to get the total cost, and subtract the principal to isolate the total interest. If the rate is 0%, the payment is simply principal ÷ n.
$$\text{Total Cost} = M \cdot n$$ $$\text{where}\quad \left\{ \begin{aligned} M &= P \cdot \dfrac{i\,(1+i)^{n}}{(1+i)^{n}-1} \\ P &= \text{Loan Amount} \\ i &= \dfrac{\text{Rate (\%)}}{1200} \\ n &= 12 \times \text{Term (years)} \end{aligned} \right.$$
Worked Example
Borrow $200,000 at 5% for 30 years. Monthly rate \( i = 0.05/12 \approx 0.0041667 \), \( n = 360 \). \( \text{PMT} \approx \$1{,}073.64 \). Total cost = \( 1{,}073.64 \times 360 \approx \$386{,}511.57 \), of which about $186,511.57 is interest — nearly as much as the original loan.
FAQ
Does this include fees or insurance? No. It covers principal and interest only. Origination fees, PMI, taxes, and insurance are extra.
What if I make extra payments? Extra principal payments lower total interest and shorten the term, so your real total cost would be less than shown here.
Is the rate the same as APR? Roughly, but APR also bundles certain fees. Use your nominal annual rate for the cleanest interest-only result.
