1. What is the Loan Payment Formula?

The loan payment formula calculates the fixed monthly payment required to fully repay a loan over its term, including both principal and interest. This is commonly used for mortgages, car loans, and personal loans.

2. How Does the Calculator Work?

The calculator uses the standard loan payment formula:

Where:

• \( PMT \) — Monthly payment amount
• \( PV \) — Principal loan amount
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Total number of payments (loan term in years × 12)

Explanation: The formula accounts for the time value of money, calculating equal payments that will pay off the loan plus interest over the specified term.

3. Importance of Loan Payment Calculation

Details: Understanding your monthly payment helps with budgeting and comparing loan offers. It shows how much you'll pay each month and the total interest over the life of the loan.

4. Using the Calculator

Tips: Enter the principal amount in USD, annual interest rate as a percentage (e.g., 5.25), and loan term in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Does this include taxes and insurance?
A: No, this calculates only principal and interest. For mortgages, taxes and insurance would be additional.

Q2: How does loan term affect payments?
A: Longer terms reduce monthly payments but increase total interest paid. Shorter terms have higher payments but lower total cost.

Q3: What's the difference between APR and interest rate?
A: APR includes fees and other loan costs, while interest rate is just the cost of borrowing the principal.

Q4: Can I calculate payments for weekly or bi-weekly payments?
A: Yes, adjust the rate (divide annual rate by 52 for weekly) and term (multiply years by 52 for weekly).

Q5: How accurate is this calculator?
A: It provides standard amortized loan payments. Some loans may have different structures (balloon payments, etc.).