Learn as you go · Free lesson
Understand your credit card & loan interest result
Start with the calculator above. Then follow the example below, one step at a time.
What this calculator does
A monthly payment does two jobs: it covers interest and pays down the amount borrowed. This calculator helps you see those parts, the estimated time to repay and the total interest under a simple set of assumptions.
Use one balance, one fixed annual rate and the same payment each month. It is a learning estimate, not a lender payoff quote. It does not model new purchases, changing minimum payments, fees or promotional rates.
How it works
Principal means the borrowed balance still to repay. Interest is the cost of borrowing it. Each modeled month, interest is calculated on the remaining balance using the annual rate divided by twelve.
The payment covers that month’s interest first. What is left reduces principal. The process repeats until the balance reaches zero, with each month rounded to cents. The last payment can be smaller than the usual payment.
Many credit cards calculate interest daily, and actual loan terms vary. Payment dates, fees, multiple rates and grace periods can change the real result. Read your own agreement and ask your lender for an exact figure if you need to settle a balance.
Monthly interest = remaining balance × annual rate ÷ 12. Principal repaid = payment − interest. Repeat each month until the balance is repaid.
Worked example
Example only. These are fictional business numbers, not recommended targets.
- Example: a fictional owner enters a $5,000 balance, a fixed 24% annual rate and a $250 monthly payment. These are example choices, not recommended terms.
- The monthly rate is 2%: 24% ÷ 12. Estimated first-month interest is $100: $5,000 × 2%.
- Of the first $250 payment, $100 covers interest and $150 reduces the balance. The remaining balance becomes $4,850.
- Next month’s interest is $97 under this model. The same payment now puts $153 toward principal. The interest part gets smaller as the balance falls.
- The model reaches repayment in 26 payments, with $1,449.37 total interest and $6,449.37 total repaid. The last payment is $199.37. Real lender calculations may differ from these example figures.
How to read your result
Compare total interest as well as the monthly payment. A smaller payment may fit a month’s cash plan but leave the balance outstanding longer. A larger payment can reduce modeled time and interest, but check that it fits your obligations and actual agreement.
If the payment does not exceed first-month interest, the balance cannot be repaid under these assumptions. The tool will warn you rather than display a false payoff date. Very long scenarios beyond 1,200 payments also produce a warning instead of an incomplete lifetime total.
Common mistakes
- Entering the monthly rate in the annual-rate field.
- Using a loan APR that includes fees as if it were just the contract interest rate.
- Assuming a changing card minimum will stay fixed every month.
- Adding new purchases while relying on a no-new-borrowing estimate.
FAQ
What does APR mean here?
For a credit card, enter the annual percentage rate for this balance. For a loan, use the contract interest rate; an APR that includes fees is not the same input.
Why does my statement show different interest?
Your lender may use daily balances, different payment dates or terms not modeled here. The calculator assumes interest once per month and payment at month-end.
What if the rate is zero?
The modeled payment goes toward principal without interest. The number of payments still depends on the balance and payment entered.
Can I combine several cards?
Not accurately if they have different rates or terms. Run one balance at a time and keep the limits of each estimate in mind.
Does the tool tell me which debt to pay first?
No. It compares one repayment scenario and does not make a personal borrowing recommendation. Consider your full situation and get qualified help for important decisions.
Related calculators and guides
Educational estimates based on your inputs. Not financial, tax, or legal advice.