Loan & Overpayment Calculator

What the loan & overpayment calculator does

The loan & overpayment calculator turns three numbers — the amount you borrow, the interest rate and the term — into a clear monthly payment and a total cost. You instantly see how much you pay back on top of the principal, which is the total interest. It’s for anyone taking out a loan, comparing offers, or wondering whether and how to overpay.

Enter the amount, the annual rate and the term, and the calculator returns:

• your first monthly payment (with equal repayments this is also every later payment; with decreasing ones it’s the highest, opening instalment),
• the total interest you’ll pay across the whole term,
• the total cost of the loan — the principal plus that interest.

In the advanced options you pick the repayment type — equal (annuity) or decreasing — and add a monthly overpayment or a one-off overpayment. You also choose the overpayment effect: whether it shortens the term, lowers the payment, or does both at once. Two extra figures then appear: how many months you cut off the term, and how much interest you save by doing it.

You also get a chart of the balance falling over time and a year-by-year schedule table — payment, principal, interest and remaining balance at the end of each year. The calculator is currency-agnostic: it works in plain numbers, so it fits any market.

How to use the calculator

1. Enter the loan amount. The principal you borrow — before interest and fees.
2. Enter the annual interest rate. The yearly rate as a percentage (e.g. 6). The calculator converts it to a monthly rate for you.
3. Set the loan term. You can enter the term in years or in months — switch the unit with the toggle next to the field. 30 years and 360 months give exactly the same result; months are handy for short loans and odd terms (e.g. 42 months).
4. Read the payment and cost. First monthly payment, total interest and total cost appear immediately.

To go deeper, open the advanced options:

• Repayment type — leave it on “equal (annuity)” for a fixed payment throughout, or choose “decreasing” to pay more early and less over time.
• Monthly overpayment — an extra amount added to every instalment.
• One-off overpayment — a single lump sum paid at the start.
• Overpayment effect — decides what the overpayment does to your loan: shortens the term, lowers the payment, or lowers the payment while still clearing the loan faster. Those are three different strategies — we cover them below.

How the payment is calculated: equal vs decreasing

Everything starts from the monthly interest rate. The annual rate is divided by 12, and the term is converted to a number of instalments (years × 12, or the months directly).

Equal (annuity) repayments are a single fixed amount for the whole term. The formula is:

payment = P × r ÷ (1 − (1 + r)⁻ⁿ)

where P is the loan amount, r is the monthly rate (annual ÷ 12) and n is the number of instalments. Early on, most of each payment is interest, and the share going to principal grows month by month. The payment is lower than with decreasing instalments, but the total interest is higher.

Decreasing repayments keep the principal portion fixed (loan amount ÷ number of instalments) while interest is charged on a shrinking balance. That’s why the first instalment is the highest and every one after it is smaller. You pay more up front but hand over less interest overall.

Total interest is simply all the interest charged on the balance across every month. Total cost of the loan = loan amount + total interest.

Example: equal repayments

A loan of 300,000 at 5% a year over 30 years (360 instalments), equal repayments.

1. Monthly rate: 5% ÷ 12 = 0.4167%.
2. Feed it into the formula → the monthly payment is 1,610.46, fixed across all 360 instalments.
3. Total interest over the term is 279,767.
4. Total cost: 300,000 + 279,767 = 579,767.

More than half of what you pay back is interest — typical for long loans with a fixed payment.

Example: decreasing repayments

A loan of 120,000 at 6% a year over 10 years (120 instalments), decreasing repayments.

1. Fixed principal portion: 120,000 ÷ 120 = 1,000 a month.
2. First month’s interest: 120,000 × (6% ÷ 12) = 120,000 × 0.5% = 600.
3. First instalment: 1,000 + 600 = 1,600. Every later instalment is smaller, because the balance keeps falling.
4. Total interest over the term is 36,300, and total cost: 120,000 + 36,300 = 156,300.

Overpaying: three strategies and which to pick

An overpayment is any amount paid above the required instalment — it goes entirely to principal. But what you actually gain from it depends on the overpayment effect you choose. The calculator offers three strategies.

1. Shorten the term (payment unchanged)

The payment stays the same, but the balance falls faster, so you clear the loan sooner — the number of instalments changes, not their size. This gives the biggest interest saving, because it pays down the principal fastest.

A loan of 100,000 at 6% a year over 10 years, equal repayments, with a 500 monthly overpayment:

1. The payment stays at 1,110.21 a month.
2. You clear the loan 45 months early — almost four years sooner.
3. Total interest falls from about 33,225 to 20,040, so you save 13,184 in interest alone.

2. Lower the payment (term unchanged)

Here it’s the opposite: the payoff date stays put, and the overpayment reduces the size of the payment. The lender recalculates the instalment from the lower balance over the same remaining months. The interest saving is smaller than with shortening, because the principal falls more slowly — but you get a lower monthly outgoing, which means more breathing room and safety in your budget.

The same loan of 100,000 at 6% over 10 years, this time with a one-off overpayment of 20,000 and the “lower the payment” effect:

1. The payoff date doesn’t move — the term is cut by 0 months.
2. The payment drops (the lender requires less each month).
3. Interest saved is about 6,586 — real, but clearly less than in the term-shortening version.

3. Lower the payment + keep paying the difference

This is a rarely-seen but clever variant. You choose to lower the payment (the lender requires less of you), but you voluntarily keep paying what you paid before. The gap between the old and the new, lower payment comes back as another overpayment — month after month (a snowball effect).

An important, honest caveat: mathematically this strategy produces exactly the same repayment result as plain “shorten the term” for the same overpayment — the same term reduction and the same interest saving. The same loan of 100,000 at 6% over 10 years with a 500 monthly overpayment in this mode finishes 45 months early and saves 13,184 — identical to strategy 1.

The difference isn’t in the numbers, it’s practical: the payment the lender requires goes down, so in a tight month you can pay less without breaking the agreement. And as long as you keep up the original amount, you clear the loan as fast as with term shortening. It’s the safety of a lower payment and the pace of shortening in one — at the cost of having to police the voluntary top-up yourself.

The earlier you start overpaying and the higher the rate, the bigger the saving in every one of these strategies — because most interest is charged early, when the balance is largest.