A simple loan is the kind most people deal with outside a bank’s fine print: lending $5,000 to a relative, borrowing from an employer, financing a used car privately or comparing a quick personal-loan quote. You know how much, at what rate and for how long, and you want the payment. This calculator gives it in one step, with a payment schedule, and flags the trap of “flat” interest quotes.
How to use the simple loan calculator
- Enter the amount borrowed and the yearly interest rate.
- Enter how long you will take to repay, in years or months.
- Choose monthly, every-two-weeks or weekly payments.
- Choose how interest is charged: on the remaining balance (standard) or flat on the full amount (add-on).
- Optionally add the first payment date to date every payment.
Simple loan formulas
When interest is charged on what you still owe — the way banks, credit unions and most written family loans work — each payment is:
where P is the amount, i is the yearly rate divided by payments per year and n is the number of payments.
With a flat (add-on) rate, interest is figured on the full amount for the full term and split evenly:
Worked example
You lend $5,000 at 10%, repaid monthly over two years.
Interest on the balance: i = 0.10 ÷ 12 = 0.0083333, n = 24. Payment = 5,000 × 0.0083333 ÷ 0.18059 = $230.72. Total interest: $537.39.
Flat 10%: interest = 5,000 × 0.10 × 2 = $1,000. Payment = 6,000 ÷ 24 = $250.00. Total interest: $1,000.
The flat quote nearly doubles the interest. Solving for the rate that makes 24 payments of $250 repay $5,000 gives a true annual rate of 18.16% — the number to compare against other offers.
Why flat rates mislead
Under a flat rate you pay interest on money you have already paid back. By the last month you owe only a few hundred dollars but are still charged as if the full $5,000 were outstanding. As a rough guide, for terms of one to five years the true APR lands at about 1.7 to 1.9 times the quoted flat rate — 5% flat over two years is about 9.3% APR, and 20% flat is about 34.7%. In the US, lenders must disclose the APR under the Truth in Lending Act, so ask for it whenever a quote is given as a flat or add-on rate.
Setting up a loan between people you know
Put it in writing
A short promissory note should state the amount, the rate, the payment amount and dates, what happens if a payment is missed, and whether early repayment is allowed. Attach the schedule this calculator produces.
Mind the IRS rate
The IRS publishes applicable federal rates every month. For family loans over $10,000, charging less than the AFR can mean the forgone interest is treated as a gift and as income to the lender. Most small personal loans fall below that threshold, but check the current AFR for larger amounts.
Keep records
Record every payment received. If the borrower stops paying, a documented loan is far easier to treat as a bad debt than an informal handshake.
For more control — solving for the term, the rate or the amount you can borrow — use the loan calculator. If interest is charged only once on the original amount and repaid in a lump sum, the simple interest calculator is the better fit.
Estimates for planning only, not tax or legal advice. Verify current IRS rules and rates before structuring a family loan.
Frequently asked questions
How do I calculate a simple loan payment?
For interest charged on the remaining balance, use P × i ÷ (1 − (1 + i)^−n), where P is the amount, i is the annual rate divided by the number of payments per year, and n is the number of payments. $5,000 at 10% repaid monthly over two years gives $230.72 a month.
What is a flat or add-on interest rate?
A flat rate charges interest on the full original amount for the whole term, even though you repay part of it with every payment. The interest is added on top and divided into equal payments. It looks cheaper than it is: a 10% flat rate over two years works out to a true APR of about 18.2%.
Should I charge interest on a loan to family?
That is a personal choice, but in the US a family loan above $10,000 that charges less than the IRS applicable federal rate (AFR) can have gift and income tax consequences for the lender. A written agreement with a payment schedule protects both sides.
Do bi-weekly payments reduce the interest?
Slightly, when interest is charged on the balance, because the balance falls a little sooner. Over two years on $5,000 at 10%, bi-weekly payments of $106.27 cost $526.23 in interest versus $537.39 with monthly payments.