Explanation: How the Loan Calculator Works

This loan calculator uses the Annuity Principle, which is very common. This means: You usually pay a constant amount every month (the "Annuity"). This monthly rate consists of two parts: an Interest portion and a Principal portion (repayment). At the beginning of the term, the remaining debt is still high, so more interest accrues – the interest portion is initially larger. With every payment, the remaining debt decreases, thereby reducing the interest, and the principal portion automatically becomes larger. You can see this exactly in the repayment schedule: Interest down, Principal up.

For the calculation, your annual interest rate is converted to a monthly rate (Annual Rate ÷ 12). Based on loan amount, monthly interest, and number of months (Term in Years × 12), the theoretical standard rate is calculated. Optionally, you can add an Extra Repayment per Month. This additional payment usually shortens the term and significantly lowers total interest costs because the debt shrinks faster. The calculator calculates an Effective Term in this case, i.e., how many months you realistically need to bring the loan to $0.

Important: Real loan offers may include additional costs (e.g., processing fees, insurance, account maintenance fees, or different rounding methods). Furthermore, banks often advertise the Effective Annual Rate, which already includes certain cost components. To keep you flexible, this calculator simply takes the interest rate you enter and shows you a transparent estimate. Use the result as orientation to better compare offers: How high is the installment? How expensive is the loan in total? How much interest do you really pay?

FAQ