1. What is the Loan Payment Formula?

The PMT formula calculates the fixed monthly payment required to repay a loan over a specified term, including both principal and interest. This advanced calculator also accounts for offset accounts and extra payments.

2. How Does the Calculator Work?

The calculator uses the standard loan payment formula:

Where:

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

Advanced Features: The calculator adjusts for offset accounts (reducing principal) and allows for additional monthly payments.

3. Importance of Loan Calculations

Details: Accurate loan calculations help borrowers understand their repayment obligations, compare loan options, and plan their finances effectively.

4. Using the Calculator

Tips: Enter the loan amount in USD, annual interest rate as a percentage, and loan term in years. Optionally include offset account balance and extra monthly payments.

5. Frequently Asked Questions (FAQ)

Q1: How does an offset account affect payments?
A: An offset account reduces the principal amount on which interest is calculated, potentially lowering payments or shortening the loan term.

Q2: What's the benefit of extra payments?
A: Extra payments reduce principal faster, saving interest and potentially shortening the loan term significantly.

Q3: How is monthly interest calculated?
A: The annual rate is divided by 12 for monthly rate. Interest compounds monthly on the remaining balance.

Q4: Are there limitations to this calculator?
A: It assumes fixed rates and regular payments. For variable rates or irregular payments, more complex calculations are needed.

Q5: How accurate are these calculations?
A: Very accurate for standard fixed-rate loans. Actual payments may vary slightly due to rounding or specific lender policies.