Principal And Interest Loan Calculator

Determine your loan repayments using a principal and interest loan calculator. Find out how much you will pay today. Get the breakdown of your loan. Read on for Monzi’s run-down of all you might need to know.

Please note, certain ideas and products presented in this article may not be offered by Monzi nor the lenders we work with. This article presents only general information. Consider seeking professional financial, taxation, legal or other advice to check how the information and ideas presented on this website relate to your unique circumstances.

What does principal and interest mean?

Before we get to principal and interest loan calculators, we first need to breakdown the two key elements: the principal and interest.

Firstly, the principal is the amount of money you borrowed, less any repayments that you’ve made. In short, it’s your outstanding loan balance.

On the other hand, interest is the additional cost on top of your principal. In short, lenders charge interest to cover the cost of lending you money. Lenders calculate your interest payment based on your interest rate and principal. Typically, your interest rate will be expressed as an annual percentage.

Given this, when you make a repayment, part of it will cover the interest payment and part of it will pay off your principal.

Now that we’ve covered that, we can dig deeper into the details. Dig into Monzi’s principal and interest loan calculator guide now. Let’s go.

What is a principal and interest loan calculator?

In short, a principal and interest loan calculator is a simple tool that can give you an idea of what your loan costs will be. From there, you can use the information to determine if the loan amount you are considering is affordable and right for you.

All you need to do is enter your loan amount, interest rate and loan term. Do that and you’ll immediately get an estimate of what your total loan cost and regular repayments will be.

There’s an abundance of these free calculators available online offered by financial institutions and lenders. Our tip though, check out the one provided by the Australian Government’s MoneySmart website. It’s easy to use and while you’re there, check out the extensive range of free financial information.

However, keep in mind that figures are only a guide. Your actual repayments may vary.

How is principal and interest calculated on a mortgage?

Mortgage calculations are no different to any other loan. However, the loan amount will be greater and the term will be significantly longer.

Mortgages typically range in the hundreds of thousands and repayment terms can be as long as 40 years!

While owning your own home is the dream, it’s a significant commitment. As a result, ensure it is the right decision before you apply. After all, you’re going to be making repayments for decades to come.

What is the formula for calculating monthly repayments?

Ultimately, your lender will calculator your repayments based on your loan amount, interest rate and loan term. In short, lenders will divide your total loan cost by your repayment term to calculate your repayment.

As a general rule, the longer your repayment term, the smaller your regular repayments will be. While the shorter your term, the larger your regular repayments will be. As a result, try to find the balance that works for you.

One thing to note is that monthly repayments aren’t your only choice. In fact, most lenders will give you the choice between weekly, fortnightly or monthly repayments. So, select the one that works best for your circumstances.

Principal and interest loan calculator: calculating total interest paid

Calculating your total interest paid is quite simple.

Once you’ve repaid your loan, simply subtract your principal amount and any fees paid from your total loan cost. This will leave you with your total interest paid.

Similarly, you can use this method as you repay your loan too. However, you will need to know your outstanding loan balance.

Keep in mind that the total interest cost will not be the same for all loans. In short, your interest rate and loan amount will influence it. As a result, it will vary.

Does paying more principal reduce interest?


Interest is calculated as a percentage of your principal amount. As a result, the lower your principal, the lower your interest payment will be.

This is seen though the course of your loan repayment. While your repayments will be the same, the breakdown is different.

As your outstanding loan balance reduces, your interest payment becomes smaller. This in turn means more funds are going to pay off your outstanding loan balance.

How do I reduce my loan interest rate?

When you apply, there may be a couple of ways that you can access lower interest rates.

First, if you’ve got good credit and a reliable history as a borrower, lenders will view you in a positive light. At the end of the day, they want to work with borrowers who they can trust to make their repayments. As a result, it is possible that you will be offered a more competitive rate than a borrower taking out a bad credit loan.

Unfortunately, good credit isn’t a reality for many people. Luckily, there’s still an option for these borrowers.

If you are prepared to apply for a secured loan instead of an unsecured loan then your interest rate may be lower. This is because there’s less risk as the loan is guaranteed by an asset. As a result, you may be offered a lower rate.

However, lenders retain the right to determine your interest rate. These are simply two possible examples although nothing is certain.

Principal and interest vs interest-only loan

Interest-only loans are typically only offered for certain mortgages like a bridging loan or construction loans.

As we know, with a principal and interest loan, you make repayments to steadily reduce your loan balance over time. However, interest-only loans are a little different.

With an interest-only loan you only need to make your interest repayment thereby leaving your principal amount unchanged. However, this is typically only for a period of your loan term (e.g. during construction). After that, interest only loans revert to the more traditional principal and interest structure.

Principal and interest loan calculator: comparing loans

Finding the right loan can ensure your principal and interest repayment structure is manageable and affordable. As a result, comparing loan products is a must. Don’t just agree to any loan, shop around to see if you can find a better deal.

Not sure what to compare? Consider the following:

  • Interest rate: you can reduce your interest payment with a lower rate. So, try to find the most competitive rate.
  • Fees and charges: these are additional costs on top of your interest and principal repayments. The fewer the better.
  • Comparison rate: includes the fees and charges to calculate your total loan cost.
  • Loan amount: how much can you borrow?
  • Repayment terms: are there a range of terms on offer? Would they suit my circumstances?
  • The lender: do they have a licence? Are there reviews positive?

Calculating monthly interest

If you’ve selected monthly repayments then you’re probably curious about what your monthly interest payments will be.

First, you will need to know your annual interest rate. Then, divide that rate by 12 (the number of months in a year) in order to get your monthly rate. From there, multiple that by your loan balance. The number you are left with is your monthly interest.

You can use this method for weekly or fortnightly repayments too. Simply divide your annual interest rate by the number of weeks or fortnights in a year. While not perfect, 52 weeks and 26 fortnights is a good estimate.

Principal and interest loan calculator black and white

Principal and interest loan bad credit

Got poor credit? You may still be able to access finance online.

While in the past, lenders may have been reluctant to consider bad credit applicants, things are a little different now. In short, it’s all about a change in philosophy.

Rather than only considering your credit history, lenders will look at your complete financial situation. After all, a few mistakes in your past shouldn’t define you. With this, lenders will assess your income and expenses to determine what repayments may be affordable.

If you meet all the necessary criteria then you may be offered a loan even with bad credit.

However, approval is not certain. Lenders retain the right to extend credit where they see fit.

What information do lenders require?

In order to be approved, lenders must first assess your application. To do this, they will require some key financial and personal details.

Ultimately, the lender’s goal is to determine if the loan is suitable for you. From there, they can provide you with an outcome.

So, before you apply, ensure you can provide the following:

  • Personal details (e.g. name, address, contact information)
  • Income and expenses
  • Online banking information
  • Any outstanding debts
  • Your loan amount and term
  • Other relevant information (e.g. Centrelink payment details)

Principal and interest loan calculator: how much should I borrow?

It’s up to you. As a rule, try to borrow as little as possible. In addition to this, only borrow what you can afford to repay.

If you’re applying for a personal loan then you may have the option to borrow cash amounts from $300 to $10,000. With the significant range on offer, lenders divide these loans into three categories. Each varies slightly so it’s important to understand which loan you will be applying for.

See below for details:

Loan sizeAmountSecurityTerm
Small loan$300 to $2,000Unsecured12 month repayment term
Medium loan$2,100 to $4,600Secured13 to 24 month repayment term
Large loan$5,000 to $10,000Secured13 to 24 month repayment term

Will borrowing affect my credit?

Borrowing can affect your credit. However, whether it’s positive or negative may depend on how you manage your loan.

In the short-term, your credit may take a slight hit. After all, opening a new credit account is detrimental for your credit score.

In the long-term, if you manage your loan well and don’t miss any repayments then it is possible to improve your credit score. However, if you miss repayments or default on repayments then your credit score will drop.

Personal loans through Monzi

At Monzi, we work with plenty of lenders who offer principal and interest personal loans. In fact, you can potentially apply for cash loans of up to $10,000 through our lender-finder service.

Simply apply today and we may be able to pair you with an available lender in just 60 minutes. Get the cash you need and spread the cost over the coming months or years.

Does that sound like something you need?

Scroll up and begin your application now.

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You won't use a penny to apply for our lender-finding service, but here's some costs you could expect from a lender

Loan amount

$300 - $2,000


12 months


20% upfront establishment fee

+ 4% monthly fee


Loan Amount of $1,000 over 6 months repayable weekly (25 weekly repayments). $1,000 (Principal Amount) + $200 (20% Establishment Fee) + $240 (fees based on 4% per month over 25 weeks) = $1,440 total repayable in 25 weekly installments of $57.60.

Under the current legislation, most small personal loan providers don’t charge an annual interest rate (you’ll know this as an APR) %. The maximum you will be charged is a flat 20% Establishment Fee and a flat 4% Monthly Fee. This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate

Loan amount

$2,001 - $4,600


13 months

24 months


48% annual percantage rate

67.41% comparison rate p.a.


Loan Amount of $3,000 over 18 months repayable weekly (78 weekly repayments). $3,000 (Principal Amount) + $400 (Establishment Fee) + $1,379.06 (reducing interest) = $4,779.06 total repayable over 18 months with weekly installments of $61.27.

The Interest Rate for Secured Medium Loans is 48%. The Typical Comparison Rate is 67.41% p.a. WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate with the lender that finances your loan. Click here to see a worked example.

Loan amount

$5,000 - $10,000


13 months

24 months


21.24% annual percantage rate

48% comparison rate p.a.


Loan Amount of $10,000 over 24 months repayable weekly (104 weekly repayments). $10,000 (Principal Amount) + $5,577.12 (Interest) = $15,577.12 total repayable over 24 months with weekly installments of $149.78.

The Interest Rate for Secured Large Amount Loans is 48%. Maximum Comparison Rate is 48% p.a. WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate with the lender that finances your loan. Click here to see a worked example.