Find the payment on a regular loan, the lump sum due on a loan with no payments until the end, or the starting value of a bond, with a full schedule.
Most borrowing falls into one of three shapes. An amortized loan is repaid in equal installments until nothing is owed. That is what people usually mean by a loan: a mortgage, a car loan, a student loan or a personal loan. A deferred payment loan has no installments, so the interest builds up and the whole amount is due at the end. A bond is the reverse view: the borrower promises to pay a fixed amount at maturity, and the calculator works out how much the lender hands over at the start.
For an amortized loan, the interest rate is converted to the matching rate for each payment period. Compounding monthly and paying monthly gives the usual rate divided by twelve, and mixing the two, such as daily compounding with monthly payments, is handled by converting the rate rather than ignoring the difference. The payment is the level amount that pays off the balance exactly at the end of the term, with each payment made at the end of its period. Interest each period is the balance times the period rate, and whatever is left of the payment reduces the principal.
The schedule shows what happens to the balance. Early payments are mostly interest, and later ones are mostly principal, because the interest shrinks as the balance falls. The yearly view adds up each year, and the each-payment view lists every installment. If the term does not divide into whole payments, such as 4 years and 5 months of weekly payments, the last payment is smaller. For the deferred loan and the bond, the schedule shows the balance growing year by year.
An amortized loan is repaid with equal payments at regular intervals until the balance reaches zero. Each payment covers the interest that has built up since the last one, and the rest reduces the principal. Mortgages, car loans, student loans and most personal loans work this way.
A deferred payment loan has no payments during its life. Interest builds up on the balance, and everything, the principal plus all the interest, is due in one lump sum at the end. Some short-term commercial loans work this way.
A bond pays a fixed amount, its face value, at maturity. Given that amount, the term and the interest rate, the calculator finds how much the lender hands over at the start, which is the face value discounted back at the rate.
The compounding setting says how often interest is added to the balance, and the pay back setting says how often you make a payment. The calculator converts the rate to the equivalent rate for each payment period, so the two can differ. Choosing monthly for both gives the familiar APR-based payment.
Stretching the same loan over a longer term lowers each payment but keeps the balance outstanding for longer, so more interest builds up. Try a shorter term, or a more frequent payment, to see the total interest fall.
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