Installment Loan Total Cost Calculator
The total cost of an installment loan is the sum of all payments made over the loan term. Total interest equals total payments minus the original principal: Total Interest = (Monthly Payment * Number of Payments) - Principal. This is the "finance charge" figure required to be disclosed under the Truth in Lending Act. Understanding total cost, not just monthly payment, is critical for comparing loan offers and choosing the most affordable option.
Total cost formula
M = P * r * (1+r)^n / ((1+r)^n - 1). Total payments = M * n. Total interest = M * n - P. Interest % = total interest / P * 100.
r is the monthly rate (APR / 12 / 100). n is the number of monthly payments. Total interest is also the "finance charge" disclosed on TILA credit disclosures and on the Loan Estimate form for mortgages.
Comparing loans by total cost
A low monthly payment does not mean a low total cost. Extending a $15,000 loan from 36 months to 60 months reduces the monthly payment by about $170 but increases total interest by over $1,000. Always compare the total of all payments and APR between loan offers, not just the monthly payment amount. The CFPB recommends using the APR (which includes fees) and total-of-payments figure from the Loan Estimate for true cost comparison.
Frequently asked questions
What is an installment loan?
An installment loan is a loan repaid in equal periodic payments over a set term. Personal loans, auto loans, mortgages, and student loans are all installment loans. Each payment includes both principal and interest, unlike revolving credit (credit cards) where balances can fluctuate.
What is the total cost formula for an installment loan?
Total cost = monthly payment * number of payments. Total interest = total cost - principal. This calculation uses the standard amortization payment formula M = P*r*(1+r)^n / ((1+r)^n - 1), where r is the monthly rate.
How does loan term affect total cost?
A longer term means lower monthly payments but more interest paid overall. For example, a $15,000 loan at 8% APR costs $474 per month for 36 months (total $17,059) versus $304 per month for 60 months (total $18,247). The longer loan saves $170 per month but costs $1,188 more in total.
What is the Truth in Lending Act requirement for installment loan disclosures?
Under TILA (Regulation Z), lenders must disclose the total of all payments, the finance charge, the APR, and the amount financed before you sign any consumer credit agreement. Review these disclosures and compare them to this calculator's output to confirm they match.
Can I reduce the total cost of an installment loan?
Yes: by making extra principal payments, by choosing a shorter term, or by refinancing at a lower rate. Even small extra payments applied to principal each month can reduce total interest significantly over the life of the loan.
Official sources
- CFPB Regulation Z (Truth in Lending): 12 CFR Part 1026.
- CFPB: Personal Loans.
Reviewed by the CalculatorHub team, edited by James Graham, 15 June 2026. See our methodology.