Finance

What a loan actually costs, with the options that change the answer

The basic monthly payment is only part of the picture. Interest-only periods, extra repayments, and offset accounts each change what you actually pay - this models all three, not just the sticker-price formula.

Currency symbol (display only - doesn't change the numbers)

Loan amount

Annual interest rate (%)

Loan term (years)

Principal & interest

Interest-only, then P&I

Interest-only period

During this period, payments cover interest only - the loan balance does not go down. Once it ends, the remaining balance is repaid over whatever is left of the loan term, so the payment steps up.

Interest-only period (years)

Extra repayments

Anything paid above the minimum goes straight toward the balance, on top of whatever the minimum payment already covers.

Extra amount per month

Other monthly costs

Anything you pay monthly alongside the loan itself - property tax and insurance, body corporate or strata, service charges, council rates. These do not affect the interest calculation, but they change what the month actually costs you, so the payment figure below shows both. Different countries bundle very different things here, which is why this is one figure you set rather than a fixed list: in the US that would typically cover property tax, homeowners insurance, HOA dues and PMI if you are paying it; in Australia council rates and strata; in the UK a service charge and ground rent.

Other costs per month

Compare a change

The single most useful thing a loan calculator can tell you is what changes if you act. Set a different rate or a different extra payment here and the result compares the two side by side.

If the rate were (% p.a.)

If extra per month were

Offset account

Money sitting in a linked offset account reduces the balance interest is calculated on, without actually being paid into the loan - it stays accessible, unlike an extra repayment. Your minimum payment stays the same, but more of it goes toward the balance each month.

Where this actually applies: offset accounts are mainstream in Australia (used on around 40% of mortgages), real but less common in the UK and New Zealand, and generally not available in the United States - most US lenders do not offer this structure, in part due to how US tax rules treat it. If you are not borrowing in Australia, the UK, or New Zealand, leave this at zero.

Starting offset balance

Added to offset per month

How this is actually calculated

This runs a real month-by-month simulation rather than a single formula, since extra repayments, offset balances, and interest-only periods each change the loan balance in a way one equation cannot capture cleanly. Each month: interest is charged on the outstanding balance minus any offset amount, the minimum payment (interest-only, or principal-and-interest once that phase starts) is applied, and any extra amount goes straight to reducing the balance. The principal-and-interest payment itself is calculated once, using the standard amortization formula, based on whatever balance and time remain at the point that phase begins - which is also exactly why the payment steps up if an interest-only period was used. Most free loan calculators use a single formula and cannot model offset accounts, extra repayments, or an interest-only period at all - certainly not all three together, changing at different points in the loan.

Check your bank's interest charge against your statement

Your statement shows a payment, an interest charge, and a balance - but is the interest number right, given your offset? Australian lenders charge interest daily on the loan balance minus the offset balance, added up over the statement period. Enter what your statement shows and this reconciles it: the expected charge, the gap, and whether that gap is normal noise or worth a phone call.

Loan balance at period start ($)

Average offset balance over the period ($)

Interest rate on your statement (% p.a.)

Days in the statement period

Interest your statement actually shows ($)

A small gap is normal: your loan and offset balances move daily (every pay cycle and purchase changes them), while this uses period averages. A rate change mid-period also splits the calculation in two. But a persistent gap of several percent every month - especially if the expected figure is consistently lower than the charge - is exactly the kind of thing worth asking your lender to walk you through line by line. This is general information, not financial advice.