Loan Payment Example Step by Step
Let’s walk through a real loan example so you can clearly understand how monthly payments are calculated.
Loan details
Loan amount: $20,000
Interest rate: 6% annually
Term: 5 years (60 months)
Monthly payment
The monthly payment is approximately $386.66.
Total payment
Total paid over the loan: $23,199.60.
Total interest
Total interest paid: $3,199.60.
What this shows
Even a moderate interest rate adds a significant cost over time, especially for longer loans.
Related guides
Read our loan payment formula guide and monthly interest explanation.