Loan Calculator

Three shapes of the same promise

Strip away the paperwork and every loan is money now against money later — the three calculators above differ only in when the money moves. The amortized loan spreads repayment evenly across the term: each payment covers that period's interest first, and the rest chips at principal, which is why early payments are mostly interest and late payments mostly principal. The deferred payment loan moves nothing until maturity, so the balance grows by compounding the entire time — the most expensive shape per dollar borrowed, and the reason balloon structures deserve respect. The bond runs the deferred loan backwards: the maturity amount is the fixed point, and the unknown is the price today. A lender who will receive $100,000 in ten years at a 6% market rate pays $55,839.48 for that promise; the discount is the interest.

Interest rate, compounding, and the APR/APY distinction

The rate on a loan is the lender's price, but its effect depends on how often it compounds. Interest charged on interest already accrued is what makes balances snowball, and more frequent compounding always means more total interest at the same quoted rate. That is why two quoting conventions coexist: APR (annual percentage rate) spreads the rate evenly across the year — 6% APR compounded monthly is simply 0.5% a month, and it is the number consumer loans are advertised with, fees included. APY (annual percentage yield) is the effective rate after compounding — the number savings products advertise. In the compound selector above, "Monthly (APR)" and "Annually (APY)" mark exactly this difference: at 6% over 10 years on $100,000 paid monthly, the APR convention costs $33,224.60 of interest while the APY convention costs $32,268.83 — the same headline rate, a $955.77 difference, purely from how the monthly rate is derived. This calculator converts honestly between the two for every frequency pairing, up to continuous compounding.

The term trade-off

A longer term is sold as affordability, and the payment really does fall — but the interest falls never. Because interest accrues on the outstanding balance, a slower payoff keeps the balance fat for years: doubling the term of the example above from 10 to 20 years cuts the payment by about 35% while more than doubling total interest, from $33,224.60 to roughly $71,943. Both numbers are on the results above — whenever a lender stretches a term to hit a monthly-payment target, look at the interest line, not just the payment.

Secured vs. unsecured

Loans are also split by what stands behind them. A secured loan is backed by collateral the lender can seize on default — the house behind a mortgage, the car behind an auto loan — so it is cheaper and easier to get, and defaulting costs the asset. An unsecured loan (credit cards, most personal and student loans) rests only on the borrower's creditworthiness, judged by lenders through character (credit history), capacity (income versus debts), capital (other assets), collateral where it exists, and conditions (the lending climate and the loan's purpose). With nothing to seize, unsecured credit carries higher rates, lower limits and shorter terms — and unpaid balances usually end with a collection agency rather than a repossession.

Frequently asked questions

What are the three types of loans here?

Amortized (fixed periodic payments to zero), deferred payment (one lump sum of principal plus all interest at maturity), and bond (a fixed maturity amount, priced backwards to today's value — a zero-coupon bond).

APR or APY — which should I pick in "Compound"?

Match your loan documents. Consumer loans quoted as APR compound monthly in this model; a rate quoted as an effective annual yield compounds annually. The difference at 6% over 10 years is about $956 per $100,000 borrowed.

Why does a longer term cost so much more?

Interest is charged on the remaining balance, and longer terms keep that balance higher for longer. Payments shrink slowly; interest grows fast.

How is a zero-coupon bond priced?

Face value divided by the growth factor: $100,000 due in 10 years at 6% compounded annually is worth $55,839.48 today. The discount is the buyer's interest.