Fixed or variable? Compare side by side with a full amortization schedule. See how rate changes affect your monthly payment.
M = P × [ i(1 + i)^n ] / [ (1 + i)^n − 1 ]The standard amortization formula calculates a fixed monthly payment that pays off the entire loan (principal plus interest) over the term. Each payment covers the interest accrued that month, with the remainder reducing the principal. The fixed payment is the formula's strength and its assumption: it only models level payments on a fixed rate. Variable-rate loans recompute the payment whenever the index moves, so this result describes the starting payment only — read the rate-reset terms before treating it as a promise. The formula also assumes no fees are folded into the balance and no early-payoff penalties; an origination fee rolled into P costs you interest twice, once as balance and once as its own charge. Where this calculator fits among the dedicated tools: a mortgage (with taxes, insurance and PMI) belongs on the mortgage calculator; a vehicle loan with trade-in belongs on the auto loan calculator; an FHA loan carries mortgage insurance premiums that this generic formula does not model, and the FHA calculator does; veterans should use the VA calculator, which handles the funding fee; and if you already hold a loan and want to compare a new rate against the old one, the refinance calculator answers that directly. Use this page for the general case — personal loans, debt consolidation, any level-payment installment loan — and for understanding the fixed-versus-variable trade-off: a fixed rate trades a slightly higher starting rate for payment certainty over the full term, which is usually worth it when rates are historically low and less compelling when they are high and expected to fall. The formula's error in practice comes from inputs, not arithmetic: lenders round payments to the cent, quote rates that differ by day, and define "term" differently (some count 360 payments for a 30-year loan, some 300). Verify the final payment schedule against the lender's disclosure before signing.
| Symbol | Meaning |
|---|---|
| M | Monthly payment (principal + interest) |
| P | Principal loan amount |
| i | Monthly interest rate (annual rate ÷ 12) |
| n | Total number of monthly payments (years × 12) |
Our calculations are based on established financial and scientific formulas. The following sources inform the default values and methodology used in this calculator:
A fixed-rate loan keeps the same interest rate — and therefore the same payment — for the entire term. A variable-rate (or adjustable-rate) loan starts with a rate that is usually lower than the fixed option, but it can rise or fall over time as a benchmark rate changes. The choice comes down to how long you plan to hold the loan, where interest rates are headed, and how much payment uncertainty you can tolerate.
| Feature | Fixed Rate | Variable Rate |
|---|---|---|
| Initial rate | Usually higher | Usually lower (introductory discount) |
| Monthly payment | Stays the same for the whole term | Can change at each adjustment period |
| Predictability | High — you always know your payment | Low — payments can increase |
| Interest rate risk | Lender bears it | Borrower bears it |
| Best when | Rates are low or rising; you value certainty | Rates are high or falling; you will sell/refinance early |
| Typical products | Most mortgages, personal loans, auto loans | ARMs, HELOCs, some student loans, credit cards |
| Risk if rates spike | None — your rate is locked | Payments can become unaffordable |
Choose a fixed rate when interest rates are historically low or you expect them to rise, when you plan to keep the loan for its full term, or when a stable payment is important for your budget. Choose a variable rate when rates are high and expected to fall, when the introductory discount is large, or when you are confident you will sell or refinance before the rate adjusts. As a rule of thumb, only take a variable rate if you could still afford the payment at its maximum cap.
Amortization is the process of spreading out a loan into fixed payments over time. Early in the loan term, a larger portion of each payment goes toward interest rather than principal. This table shows how the split changes over the life of a $30,000 loan at 6% APR over 5 years.
| Year | Annual Payment | Paid to Interest | Paid to Principal | Remaining Balance | Interest % of Payment |
|---|---|---|---|---|---|
| Year 1 | $6,960 | $1,740 | $5,220 | $24,780 | 25% |
| Year 2 | $6,960 | $1,430 | $5,530 | $19,250 | 20.5% |
| Year 3 | $6,960 | $1,100 | $5,860 | $13,390 | 15.8% |
| Year 4 | $6,960 | $750 | $6,210 | $7,180 | 10.8% |
| Year 5 | $6,960 | $380 | $6,580 | $0 | 5.5% |
In the first year of this loan, 25% of your payment goes to interest. By the final year, only 5.5% does. This front-loaded interest structure is why making extra principal payments early in the loan saves the most in total interest. An extra $50/month in Year 1 saves more than $100/month in Year 4. Use this loan calculator to see your personalized amortization schedule.
Lenders compute your payment from a single amortization formula. Walking through it once by hand makes it obvious why early payments are mostly interest — and why extra principal payments hit so hard:
The reason an early-payment-heavy interest split hurts: at month one only $358 of your $483 built equity, but by month 55 it is over $470. This is also why one extra principal payment in year one saves far more interest than the same payment in year four — it removes balance that would otherwise have compounded for the entire remaining term.
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Rates verified 2026-10-09 · Sourced from official seller fee schedules