David is a Chartered Financial Analyst with 15 years of experience in consumer lending and personal finance planning.
This 4-in-1 Installment Loan calculator helps you understand your loan options. Enter any three variables—Loan Amount, Annual Rate, Loan Term, or Monthly Payment—to solve for the fourth.
Installment Loan Calculator
Installment Loan Formulas (Amortization)
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1 ]
Solve for Loan Amount (P):
P = M [ (1 + i)^n – 1 ] / [ i(1 + i)^n ]
Solve for Loan Term (n, in months):
n = -ln(1 – (P*i / M)) / ln(1 + i)
Solve for Rate (i):
*Solved iteratively (no direct formula)
Formula Variables
- (P) Loan Amount (Principal): The total amount of money you are borrowing.
- (R) Annual Rate: The annual interest rate (APR) for the loan.
- (T) Loan Term (Years): The total length of time you have to repay the loan.
- (M) Monthly Payment: The fixed payment amount due each month.
- (i): Monthly Interest Rate (R / 12 / 100)
- (n): Total Number of Payments (T * 12)
Related Calculators
What is an Installment Loan?
An installment loan is a broad category of loan where you borrow a lump sum of money and pay it back in fixed, regular payments (installments) over a set period of time (the “term”). Each payment consists of both principal (the money you borrowed) and interest.
This is the most common type of loan structure. Mortgages, auto loans, personal loans, and student loans are all examples of installment loans. This structure provides predictability for the borrower, as the payment amount and the payoff date are known from the beginning.
Installment loans are the opposite of “revolving credit,” such as a credit card or a line of credit (HELOC). With revolving credit, you can draw and repay funds up to a certain limit, and your payment amount changes based on your outstanding balance.
How to Calculate an Installment Loan Payment (Example)
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Identify Your Loan Details
You are taking out a $10,000 (P) personal loan. The term is 5 years (T) and the annual rate is 12.99% (R). You need to find your monthly payment (M).
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Find Monthly Rate (i) and Total Payments (n)
Monthly Rate (i) = 12.99% / 12 / 100 = 0.010825
Total Payments (n) = 5 Years * 12 Months = 60 -
Apply the Amortization Formula
The formula is: M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1 ]
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Calculate the Payment
M = $10,000 [ 0.010825 * (1.010825)^60 ] / [ (1.010825)^60 – 1 ]
M = $10,000 [ 0.010825 * 1.9079 ] / [ 1.9079 – 1 ]
M = $10,000 [ 0.020653 ] / [ 0.9079 ]
M = $10,000 * 0.022748 -
Final Result
Your fixed monthly payment (M) will be $227.48 for the next 5 years.
Frequently Asked Questions (FAQ)
An installment loan has a much longer term (months or years) and significantly lower interest rates (e.g., 5-36% APR). A payday loan is an extremely high-interest loan (e.g., 400%+ APR) that is typically due in full on your next payday (2-4 weeks).
What can I use an installment loan for?Almost anything. Common uses include debt consolidation, home improvements, medical bills, car purchases, or any large, one-time expense.
How much can I afford to borrow?Use this calculator to find out. Decide on a Monthly Payment (M) you can afford. Enter a typical Annual Rate (R) (e.g., 15%) and Loan Term (T) (e.g., 3 years). Leave the “Loan Amount (P)” field blank and click “Calculate.” The result shows the total principal you can afford with that payment.
Can I pay off an installment loan early?Yes, in most cases. Most personal, auto, and student loans do not have “prepayment penalties.” This means you can pay extra each month or make lump-sum payments to pay off the principal faster and save on interest. Mortgages sometimes have them, so you should always check your loan agreement.