Enter the loan’s repayment assumptions
Choose Equal-payment amortizing or Interest only, balloon at end. Enter the amount borrowed, nominal annual interest rate, number of payment periods, monthly or quarterly frequency, and any upfront fee withheld from proceeds. Number of payment periods means payments, not years: 12 monthly periods is one year, while 12 quarterly periods is three years. The fee reduces cash received and does not reduce the contractual principal balance.
Amortizing payment formula and worked example
The periodic interest rate is the nominal annual rate as a decimal divided by payments per year. With principal P, periodic rate i and n payments, payment = P × i ÷ [1 − (1 + i)−n]. At zero interest it is P ÷ n. Each payment covers that period’s interest and reduces the balance with the rest.
Enter an amortizing loan of 10,000, annual rate 12%, 12 monthly periods and fee 100. The periodic rate is 1%, and the regular payment is approximately 888.49. The first period’s interest is 10,000 × 1% = 100; principal repaid is about 788.49, leaving about 9,211.51. The schedule totals approximately 661.85 interest and 10,661.85 contractual repayments. Displayed rows round to cents; underlying calculations retain precision, so adding rounded rows can differ slightly from the totals.
Why fees and balloons change the interpretation
The 100 fee leaves 9,900 net proceeds. Total repayments minus those proceeds gives 761.85 borrowing cost. The calculator solves a periodic cash-flow yield from those net proceeds and scheduled repayments, then compounds it to an effective annual rate of approximately 14.835556%. This is an analytical borrowing yield, not a statutory APR disclosure or a lender quote.
With the same 10,000 principal, 12% rate and 12 monthly periods but Interest only and zero fee, the regular interest payment is 100. The last payment is 10,100, including the full principal balloon. Total interest is 1,200. A low regular payment therefore does not mean the principal has been paid down.
Assumptions and supported scope
This model assumes a fixed nominal rate and payments at equal period ends. It supports 1–360 periods, monthly or quarterly payments, and a non-negative fee strictly below principal. It excludes variable rates, prepayment, taxes, insurance, other fees, irregular dates and contract-specific day-count conventions. Actual contracts can use different rounding or compounding. All examples are hypothetical; no financing offer or eligibility assessment is provided.
Method reference
CFPB: What is amortization? explains how scheduled payments divide between principal and interest; the specific assumptions above define this business-loan model.
Method and worked example checked against the calculator implementation. About our methods · Report a correction