Calculate a loan payment: formula and example
With an instalment loan you pay the same amount every month. It consists of interest and repayment. How high it is depends on amount, interest and term.
The formula
Payment = loan amount times monthly rate divided by (1 minus (1 plus monthly rate) to the power of minus months). The monthly rate is the annual rate divided by 12. Without interest the payment is simply amount divided by months.
Example
10,000 € at 6 % nominal rate over 60 months: payment 193.33 €. In total you pay 11,599.80 €, of which 1,599.80 € is interest.
Nominal and effective annual rate
The nominal rate is the interest rate alone. The effective annual rate includes fees. To compare offers, the effective annual rate is better.
Good to know
- A longer term lowers the payment but raises the total interest.
- Payment protection insurance raises the cost and is not included here.
- Extra payments can lower interest if the contract allows them.
Example calculation, not a loan offer and not financial advice. Fees and the effective annual rate are not included. Updated: November 2026