How to Calculate Loan Payments for Personal and Student Loans

Understanding loan payment components

Before you calculate a loan payment, you need to know three key inputs: the principal (the amount you borrow), the interest rate (the annual cost of borrowing expressed as a percentage), and the loan term (how long you have to repay). For fixed-rate loans, these three numbers determine your monthly payment exactly.

The interest rate on most personal and student loans is expressed as an annual percentage rate (APR). The APR includes the interest rate plus any fees the lender charges, so it may be higher than the raw interest rate. When you compare loan offers, the APR gives you a more complete picture of the true annual cost. However, for calculating the monthly payment on a standard fixed-rate loan, you start with the stated annual interest rate, not the APR, because the formula assumes interest is charged on the outstanding balance, not on fees.

• Principal (P): The loan amount you receive.
• Annual interest rate: The yearly cost of borrowing, expressed as a percentage (e.g., 10.5%).
• Loan term: The number of years (or months) you have to repay the loan.
• Monthly interest rate (r): The annual rate divided by 12.
• Number of payments (n): The total number of monthly payments over the loan term.

Sources: TransUnion, Bankrate

The loan payment formula explained

For a fixed-rate amortizing loan—a loan where you pay the same amount each month and the payment covers both interest and principal—the monthly payment is calculated using this standard formula:

M = P × [r(1+r)^n] / [(1+r)^n − 1]

Where M is the monthly payment, P is the principal, r is the monthly interest rate (annual rate divided by 12), and n is the number of monthly payments. This formula works for both personal loans and student loans, as long as the loan has a fixed interest rate and a set repayment term.

You can use this formula with a scientific calculator or a spreadsheet. Many online calculators use exactly this formula, so understanding it helps you verify the numbers yourself.

• The formula assumes a fixed interest rate for the life of the loan.
• It does not apply to variable-rate loans or loans with balloon payments (where the final payment is much larger than the usual monthly payment).
• For loans with an origination fee deducted from the loan amount, the actual principal you receive may be lower than the amount you repay.

Sources: TransUnion, Bankrate

Calculating monthly payments for a personal loan: example

Let’s work through a real example from a major credit bureau: a $35,000 personal loan with an annual interest rate of 10.5% and a 36-month term. The number of payments is 36.

Plug these numbers into the formula: M = 35,000 × [0.00875 × (1+0.00875)^36] / [(1+0.00875)^36 − 1].

Working through the math, the monthly payment comes to approximately $1,137.59.

This example illustrates how the formula works for a typical personal loan. The exact payment may vary slightly depending on how the lender rounds the calculation or charges fees.

Sources: TransUnion

Calculating monthly payments for a student loan: example

Federal student loans use the same fixed-rate amortization formula, but the interest rates are set by Congress for each academic year. For the 2025–2026 academic year, the interest rate on federal undergraduate Direct Subsidized and Unsubsidized Loans is 6.39%.

That’s 120 monthly payments.

Using the formula, M = 30,000 × [0.005325 × (1+0.005325)^120] / [(1+0.005325)^120 − 1].

Note that federal student loan interest rates can change from year to year, so you should check the current rate before relying on an example like this. For a new loan, the rate is fixed for the life of the loan.

Sources: SmartAsset, FinAid.org

Using interest rates and loan terms in calculations

The interest rate and the loan term are the two variables that most affect your monthly payment. A longer term lowers the monthly payment but increases the total interest paid over time. A shorter term raises the monthly payment but saves total interest.

For personal loans, terms typically range from 2 to 7 years, with average APRs varying by credit score. For example, NerdWallet reported average APRs for borrowers who pre-qualified with them over a recent 30-day period: excellent credit (720-850) at 14.78%, good credit (690-719) at 19.37%, fair credit (630-689) at 23.55%, and bad credit (300-629) at 26.89%. These are based on NerdWallet's own data and may not represent the overall market.

Federal student loans typically have a standard repayment term of 10 years, but you may have the option to choose income-driven repayment plans that can lower your monthly payment based on your income and family size. Private student loans often have terms from 10 to 15 years.

When you calculate your own payment, always use the actual interest rate and term from your loan agreement or your lender’s offer.

• Higher interest rates mean higher monthly payments.
• Longer terms mean lower monthly payments but more total interest.
• For federal loans, terms can be extended under income-driven repayment, but that may increase total interest.
• Always use the APR when comparing loan offers, but use the stated interest rate in the payment formula.

Sources: NerdWallet, SmartAsset, Sallie Mae

Estimating total interest and total cost

Once you have the monthly payment, you can estimate the total cost of the loan by multiplying the monthly payment by the number of payments. The total interest is that total cost minus the principal amount you borrowed.

For example, according to NerdWallet, a $10,000 three-year personal loan at a 10% APR would incur $1,616 in total interest, while the same loan at a 25% APR would incur $4,314 in total interest. Note that these figures use APR, which includes fees, and are examples based on NerdWallet's calculations.

For federal student loans, the same principle applies. Keep in mind that federal student loans may have origination fees that affect the total cost; the examples here exclude such fees for simplicity.

When comparing loan offers, look at both the APR and the total cost over the full term, not just the monthly payment.

Sources: NerdWallet, FinAid.org

Comparison of payment scenarios: personal vs. student loan

The table below compares typical payment scenarios for a personal loan, a federal student loan, and a private student loan, based on data from the research sources. For complete scenarios, we include both the total interest and the total cost (principal plus interest).

• Federal student loans generally offer lower fixed interest rates and more borrower protections, such as income-driven repayment and loan forgiveness, compared to private student loans.
• Private student loans may have variable interest rates that can change over time, and they typically have fewer repayment flexibility options.
• Personal loans are typically unsecured and have higher interest rates than federal student loans, but they can be used for any purpose.

Sources: TransUnion, SmartAsset, Sallie Mae, Consumer Financial Protection Bureau (CFPB)