David is a Chartered Financial Analyst with 15 years of experience in consumer lending and asset-backed financing.
This 4-in-1 Secured Loan calculator helps you estimate payments for loans backed by collateral. Enter any three variables—Loan Amount, Annual Rate, Loan Term, or Monthly Payment—to solve for the fourth.
Secured Loan Calculator
Secured 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 a Secured Loan?
A secured loan is a loan that is backed by collateral. Collateral is a valuable asset you own, such as a car, a house, or a savings account, that you pledge to the lender. If you fail to repay the loan as agreed (default), the lender has the legal right to seize that asset to recover their money.
This collateral makes the loan “secure” for the lender, significantly reducing their financial risk. Because the risk is lower, lenders are willing to offer secured loans with lower interest rates, higher borrowing amounts, and longer repayment terms compared to unsecured loans.
The most common examples of secured loans are mortgages (secured by your house) and auto loans (secured by your car’s title). Other examples include home equity loans (also secured by your house) and some types of business loans secured by equipment or inventory.
How to Calculate a Secured Loan Payment (Example)
-
Identify Your Loan Details
You are getting a $25,000 (P) auto loan, which is secured by the car. The term is 5 years (T) and the annual rate is 7.5% (R). You need to find your monthly payment (M).
-
Find Monthly Rate (i) and Total Payments (n)
Monthly Rate (i) = 7.5% / 12 / 100 = 0.00625
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 ]
-
Calculate the Payment
M = $25,000 [ 0.00625 * (1.00625)^60 ] / [ (1.00625)^60 – 1 ]
M = $25,000 [ 0.00625 * 1.45329 ] / [ 1.45329 – 1 ]
M = $25,000 [ 0.009083 ] / [ 0.45329 ]
M = $25,000 * 0.020038 -
Final Result
Your fixed monthly payment (M) will be $500.95 for the next 5 years.
Frequently Asked Questions (FAQ)
The main advantage for the borrower is a much lower interest rate (APR). Because you are providing collateral, you reduce the lender’s risk, and they pass those savings on to you in the form of lower interest charges.
What is the main disadvantage of a secured loan?The main disadvantage is the risk. If you are unable to make your payments for any reason, you could lose the asset you pledged as collateral. For example, your car could be repossessed or your home could be foreclosed on.
Is a secured loan a good idea?It can be a very good idea for large, specific purchases where the loan is designed for that asset. For example, it is standard and wise to use a mortgage (a secured loan) to buy a house. Using an unsecured loan would be much more expensive. However, you should be very confident in your ability to repay the loan before pledging a valuable asset.
How do I find the Annual Rate (R) on a secured loan offer?You can use this calculator. Enter the Loan Amount (P), the Loan Term (T), and the offered Monthly Payment (M). Leave the “Annual Rate (R)” field blank and click “Calculate.” The result will show you the exact APR of the loan offer, allowing you to compare it with others.