Try the math
What a term loan costs.
A lump sum repaid on a fixed schedule. Put in the amount, a rate and the term, and see the payment and what the money costs over its life.
The rate is a starting point, not a quote. If somebody has quoted you one, put it in and see what it costs.
The arithmetic
- You borrow
- $75,000
- Illustrative rate
- 12% a year
- Repaid over
- 3 years
- Monthly payment
- $2,491
- Total repaid
- $89,679
- Interest paid
- $14,679
Illustration, not a quote. An origination fee and the prepayment terms change the real cost; ask for both before you sign.
See my optionsBefore you sign
Test the monthly payment against your thinnest month, not your best one.
How a term loan works, in fullA worked example
The starting position, written out.
Say you borrow $75,000 to fit out a second bay, at an illustrative 12% a year, repaid over three years in level monthly payments.
Stretch the same loan to five years and the payment drops to $1,668 a month, but the interest rises to $25,100. A longer term buys a lighter month with more money; a shorter one buys a cheaper loan with a heavier month. Neither is right in the abstract. The right one is the payment your thinnest month clears.
Illustration, not a quote
- You borrow
- $75,000
- Illustrative rate
- 12% a year
- Repaid over
- 3 years
- Monthly payment
- $2,491
- Total repaid
- $89,679
- Interest paid
- $14,679
Nobody has offered you these terms. The figures are the calculator's own arithmetic at its starting position; real terms come from a funding partner.
How to read the result
What the numbers are telling you.
The payment is level; what is inside it is not
In the first month of the example, $750 of the $2,491 is interest and $1,741 is principal. By the last month it is almost all principal. That is why paying a term loan off early saves less than it looks like it should: much of the interest has already been paid in the early months.
Rate is not APR
The slider is an interest rate. An APR folds the fees into that rate so two loans can be compared. An origination fee taken at the start raises the APR without touching the monthly payment. Ask for both, in writing, and compare loans on the APR.
The term should match what the money buys
Money for a second bay that earns for ten years can carry a five-year term. Money for a season’s stock should not be on a three-year loan, because you will be paying for it long after it sold. If the need is short, a shorter shape is usually cheaper, and the other calculators on this page show which.
Questions
About the arithmetic.
The questions about a term loan itself, and what a funding partner may look at, are on its page.
Term loan, in fullWhy does a longer term cost more in total but less each month?
Because interest runs for longer. On $75,000 at 12%, three years is $2,491 a month and $14,679 in interest; five years is $1,668 a month and $25,100 in interest. Illustration, not a quote. The extra two years cost about $10,400 for a payment that is about $820 lighter. Whether that trade is worth it depends on what the lighter month lets you do.
Does the calculator include the origination fee?
No. An origination fee is usually taken out of the amount before it lands, so you receive less than you borrow and repay the full figure. As an illustration, a 3% fee on $75,000 is $2,250, so $72,750 lands and $89,679 goes back. Put the amount that will actually land against the total repaid to see the real cost.
What is the difference between the rate and the APR?
The rate is the price of the money. The APR is the price of the money with the fees folded in, expressed over a year, so two quotes can be set side by side. A loan with a lower rate and a bigger fee can have the higher APR. Compare on the APR, and ask for it in writing.
Is the payment the same every month?
On a level-payment term loan, yes: the calculator shows the fixed figure. Some term loans are repaid weekly or even daily instead, and some carry a rate that moves. The arithmetic is the same shape; the cadence is what to check against your deposits. A weekly payment out of a business paid monthly is a mismatch you feel every fourth week.
How much does a term loan cost compared with an advance?
The example costs $14,679 over three years on $75,000. The same $75,000 as a merchant cash advance at a factor of 1.30 costs $22,500 however fast you remit it, and an advance is remitted daily or weekly rather than monthly. Illustrations, not quotes, and not a claim that either will be offered. The term-loan page sets out when each shape fits.
The other shapes
Not the one you meant?
- Try the math
Merchant cash advance
Factor rate times advance: the total you remit, and what the money costs.
- Try the math
Business line of credit
Interest on what you draw, over the months it takes to clear.
- Try the math
Equipment financing
The payment on the machine, and what financing adds to its price.
- Try the math
SBA loan
The payment on a long, government-backed term, and the interest over it.
- Try the math
Invoice factoring
Cash now on an unpaid invoice, the fee, and what comes back when it is paid.
Know what you can carry?
Then tell me what you need. About two minutes, no credit pull to start, and the decision stays yours.