Loan Interest Calculator – Daily, Monthly & Yearly Rates

Online Loan Interest Calculator

Use the loan interest calculator below to quickly calculate your loan repayment amount, total interest, and overall payment based on the loan amount, interest rate, and loan term. You can also choose how often interest is compounded and how frequently you make repayments—daily, monthly, quarterly, semiannually, or annually. The calculator provides instant results as soon as you enter your details.

Definition: A loan interest calculator is a simple tool that takes loan amount, interest rate (APR), term, compounding frequency, and payment frequency, then computes the periodic payment, total amount paid and total interest over the life of the loan.

What Is a Loan?

A loan is an agreement where one party (the lender) provides money to another party (the borrower) with the understanding that the borrower will repay the principal plus interest over time.

Loans vary by purpose (e.g., personal, auto, mortgage), security (secured vs unsecured), interest structure (fixed vs variable), and how interest is calculated and compounded.

How Does a Loan Work

1. Principal (P): the initial borrowed amount.
2. Interest (APR): annual percentage rate quoted as a nominal rate. APR expresses how much interest is charged per year on the outstanding balance.
3. Compounding: determines how often interest is added to the loan balance (annually, semiannually, monthly, daily, etc.). Compounding can make the effective rate higher than the nominal APR.
4. Payment schedule (payback frequency): how often payments are made (monthly, quarterly, annually, etc.). The period rate used for payment calculations depends on both the compounding method and the payback frequency.
5. Loan term: length of time to repay, expressed in years, months, days, etc. The total number of payments is term × payments per year.

Interest is generally calculated on the outstanding balance at the applicable period rate; payments typically consist of interest plus principal reduction.

How to Use the Loan interest Calculator

To use the loan interest calculator above. Follow these steps:

1. Enter Loan amount — the principal (for example, 10000).
2. Enter Loan term — a number and choose the unit (years, 1/2 years, quarters, months, days). The calculator converts that value to years internally.
3. Enter Interest Rate (APR) — nominal annual percentage (for example, 5 for 5%).
4. Choose Compound frequency — how many times per year interest is compounded (annually, semiannually, quarterly, monthly, daily).
5. Choose Payback frequency — how often payments are made (annually, semiannually, quarterly, monthly, daily).
6. Click Calculate — results appear below the form and show: payment per payback period, total payments, and total interest.

Hints:

• If APR is zero, the calculator evenly divides principal across payments.
• If compounding and payback frequencies differ, the calculator converts APR → effective annual rate → period rate for the chosen payback.

Loan Calculation Formula

Our Loan Interest Calculator performs these steps and uses these formulas:

Step 1 – Convert APR to nominal rate:

r_nom=APR100

Step 2 – Compute effective annual rate:

r_eff= (1 +r_nomm)^m− 1

Step 3 – Convert to period rate (matching payment frequency p):

r_period= (1 + r_eff)^1/p− 1

Step 4 – Compute total number of payments:

n = round(years × p)

Step 5 – Payment per period (for r_period ≠ 0):

M = P ×r_period × (1 + r_period)ⁿ(1 + r_period)ⁿ − 1

Special case when r_period = 0 (zero-interest loan):

Step 6 – Totals:

Total Payments = M × n
Total Interest = Total Payments − P

These are exactly the steps the our loan calculator follows: convert nominal APR → effective annual rate → period rate → payment formula.

Loan Example Calculations

Example A: Typical consumer loan (monthly payments)

Values:

• Principal P = $10,000
• APR = 5.0%
• Compound frequency = Monthly (m = 12)
• Payback frequency = Monthly (p = 12)
• Term = 5 years

Step results:

• r_nom = 5.0 ÷ 100 = 0.05
• r_eff_annual = (1 + 0.05 ÷ 12)¹² − 1 ≈ 0.0511618979 (≈ 5.1162% effective annual)
• r_period = 12th root of (1 + r_eff_annual) − 1 ≈ 0.004166666666666652 (≈ 0.4167% per month)
• n = 5 × 12 = 60 payments

Payment and totals:

• Payment per month M ≈ $188.71
• Total Payments ≈ $11,322.74
• Total Interest ≈ $1,322.74

(If the same APR were quoted and compounded monthly, monthly period rate is very close to APR/12. Small differences arise because the calculator first computes effective annual rate then converts to period rate for internal consistency.)

Example B: Semiannual compounding, monthly payments

Values:

• Principal P = $5,000
• APR = 6.0%
• Compound frequency = Semiannually (m = 2)
• Payback frequency = Monthly (p = 12)
• Term = 3 years

Step results:

• r_nom = 0.06
• r_eff_annual = (1 + 0.06 ÷ 2)² − 1 = (1 + 0.03)² − 1 ≈ 0.0609 (≈ 6.0899% effective annual)
• r_period = 12th root of (1 + 0.0609) − 1 ≈ 0.0049386220 per month
• n = 3 × 12 = 36 payments

Payment and totals:

• Payment per month M ≈ $151.94
• Total Payments ≈ $5,469.94
• Total Interest ≈ $469.94

Example C: Zero interest

Values:

• Principal = $1,200
• APR = 0.0%
• Any compounding & payback monthly
• Term = 1 year

Since r_period = 0, payment M = P ÷ n = $1,200 ÷ 12 = $100.00. Total interest = $0.00.

What Is Compounding Frequency

Compounding frequency is how often interest is applied to the outstanding balance in a year. Common options:

• Annually: once per year (m = 1)
• Semiannually: twice per year (m = 2)
• Quarterly: four times per year (m = 4)
• Monthly: twelve times per year (m = 12)
• Daily: 365 times per year (m = 365)

Why it matters: with the same nominal APR, more frequent compounding yields a higher effective annual interest rate because interest is calculated and added to the balance more often.

What Is Payback Frequency

Payback frequency is how often payments are made toward the loan principal and interest. Examples:

• Annually (p = 1)
• Semiannually (p = 2)
• Quarterly (p = 4)
• Monthly (p = 12)
• Daily (p = 365)

The loan interest calculator aligns the period rate to the payback frequency so payments, interest accrual and compounding are consistent even when compounding and payment frequencies differ.

What Is a Loan Term

Loan term is the total length of time scheduled to pay off the loan, expressed in years, months, days, etc. Internally this is converted into years and used with payback frequency to compute the total number of payments:

n = round(years × payments per year)

Rounding ensures a whole number of payments. If exact fractional-payment schedules are needed (rare), use a payment plan that matches that requirement.

Secured vs Unsecured Loan

• Secured loans: backed by collateral (house, car, equipment). If borrower defaults, lender can seize the collateral. Secured loans often carry lower interest rates because the lender’s risk is reduced.
• Unsecured loans: no collateral. Approval and rate depend on creditworthiness. Unsecured loans generally carry higher interest rates to compensate lenders for increased risk.

The loan calculator computes payments regardless of secured or unsecured status — but actual APR and terms usually vary by loan type and borrower credit profile.

FAQs About Loans

Q1: Why convert nominal APR to an effective annual rate?
A1: Because nominal APR with a compounding frequency does not express how much interest compounds over a year. Effective annual rate reflects the true yearly growth after compounding and ensures consistent conversion to the period rate used for payments.

Q2: Can compounding and payback frequencies be different?
A2: Yes. For example, APR might be compounded monthly while payments are made quarterly. The tool converts APR → effective annual → period rate that matches payments so the amortization math is correct.

Q3: Why does the calculator round the number of payments?
A3: Payments must be whole occurrences. Rounding ensures a whole number of scheduled payments. If a fractional final payment is needed, a lender may include a shorter final payment or adjust the schedule. The calculator uses a simple round to produce a practical payment count.

Q4: What if APR changes (variable rate)?
A4: This calculator assumes a fixed APR for the whole term. For variable-rate loans, amortization requires piecewise calculations whenever the rate changes.

Q5: Is APR the same as APR with fees?
A5: No. APR sometimes includes certain fees and gives a broader cost measure. The calculator treats APR as the nominal interest rate; any fees should be added separately to principal or included in APR if the lender provides an adjusted APR.

Q6: Why is total interest higher when compounding is more frequent?
A6: More frequent compounding causes interest to be calculated on interest more often, increasing the effective interest and therefore total interest paid for the same nominal APR.

Conclusion and Best Practices

• Use the loan interest calculator to quickly estimate periodic payments, total paid, and total interest.
• Always confirm whether APR is nominal or already effective and whether it includes fees. If the lender quotes a nominal APR with a compounding schedule, input the compounding frequency to get accurate results.
• Match payback frequency to the payment schedule offered by the lender (e.g., monthly payments → choose monthly).
• For zero-interest loans the payment is simply principal ÷ number of payments.
• When comparing loan offers: compare effective annual rates and total cost (including fees), not just the nominal APR.