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Loans

Personal, auto, and student loans explained.

A loan is a lump sum you borrow and repay over a set term in fixed installments. Each payment covers interest on the outstanding balance plus a portion of the principal — a process called amortization, where early payments are mostly interest and later payments are mostly principal.

This section explains the parts of a loan that determine its cost: the interest rate versus the APR, the loan term, origination fees, and how personal, auto, and student loans differ in structure and protections. Understanding amortization is the key to seeing why a longer term lowers the monthly payment but raises the total interest paid.

The Loan Payment calculator applies the standard amortization formula so you can see the monthly payment and total interest for a given amount, rate, and term.

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Common questions

What is loan amortization?
Amortization is the schedule that splits each fixed payment between interest and principal. As the balance falls, the interest portion shrinks and the principal portion grows, until the loan reaches zero at the end of the term.
What is the difference between interest rate and APR on a loan?
The interest rate applies to the balance. The APR also includes certain upfront fees expressed as a yearly rate, so it usually gives a fuller picture of the cost of borrowing.
Does a longer loan term save money?
A longer term lowers each monthly payment because repayment is spread over more months, but it typically increases the total interest paid over the life of the loan.

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