Total interest calculator
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The instalment is what you feel; the total interest is what the loan actually costs. The two can point in opposite directions, because the cheapest monthly payment usually belongs to the longest term — and the longest term is the most expensive loan.
The formula
Total interest = instalment × number of payments − amount borrowed. Simple to state and routinely startling to compute: over long terms at ordinary rates it frequently approaches or exceeds the principal itself.
A worked example
A $250,000 loan at 8.75% over 20 years:
| Monthly instalment | $2,209 |
|---|---|
| Total interest | $280,225 |
| Total repaid | $530,225 |
| Interest vs loan | 112% |
| Interest in month 1 | $1,823 |
| Interest in the final month | $16 |
What to watch
- On a thirty-year loan at nine per cent you repay roughly twice what you borrowed. The second half of that is interest.
- One percentage point of rate is worth far more than it sounds over a long term — often tens of thousands on an ordinary mortgage.
- Interest scales with time much more aggressively than with the amount borrowed, which is why shortening a term beats shrinking a loan.
- Where interest is tax-deductible the real cost is lower than the headline, and the comparison against investing changes with it.
The trap
Comparing lenders on the instalment. A smaller payment on a longer term is not a cheaper loan, and presenting it as one is the oldest trick in retail lending.
Questions
How much interest will I pay in total?
Instalment times the number of payments, less the amount borrowed. On our $250,000 example at 8.75% over 20 years that is $280,225 — about 112% of the loan itself.
How do I reduce the total interest?
Shorten the term, prepay early, or negotiate the rate — in roughly that order of effect. Shortening the term raises the instalment less than people expect while cutting the interest far more.
Is a lower instalment always better?
No, and it is usually worse. A lower instalment almost always means a longer term, and a longer term means more interest. Compare total repaid, then check the instalment is one you can actually sustain.
Rate bands and lending rules on this page were last reviewed on 2026-10-23 and are indicative, not offers. The arithmetic is produced by the same code the calculator runs. Confirm the terms with your own lender before committing; nothing here is financial advice.