How loan repayments are calculated
Most Australian loans are principal and interest loans with a fixed repayment. Each payment covers that period's interest, and the rest reduces the balance. Early on most of each payment is interest; by the end it's mostly principal.
The formula is: repayment = P × r ÷ (1 − (1 + r)−n), where P is the loan amount, r is the interest rate per period and n is the number of repayments. With a balloon, the balloon's present value is taken off first.
Interest rate vs comparison rate
Lenders in Australia must show a comparison rate next to the advertised rate. It rolls most upfront and ongoing fees into a single percentage, so you can compare loans fairly. The calculator shows an effective rate including the fees you enter, which works the same way.
Calculators for each loan type
- Car loan calculator, with balloon payments
- Personal loan calculator, with fees
- Mortgage repayment calculator for home loans
- Refinance calculator to compare a new rate
Common questions
How do I calculate loan repayments?
Use the formula repayment = P × r ÷ (1 − (1 + r)^−n), or enter your loan amount, rate and term in the calculator. For example, $25,000 at 8.5% over 5 years is about $513 a month.
Are fortnightly repayments cheaper?
Fortnightly repayments equal to half your monthly repayment mean 26 payments a year, the same as 13 monthly payments, so you pay the loan off faster. The calculator converts your monthly repayment to the same yearly amount.
What is the comparison rate?
A rate that includes most fees as well as interest, which lenders must show in Australia so you can compare loans fairly.
General information only, not financial or tax advice. Speak to a registered tax agent or licensed adviser about your situation.