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 components.

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)
• \( n \) — Total number of payments (term in years × 12)
• \( PMT \) — Monthly payment amount (USD)

Explanation: The formula accounts for compound interest over the life of the loan, calculating a fixed payment that will pay off the loan exactly by the end of the term.

3. Importance of Loan Calculation

Details: Understanding your monthly payment helps with budgeting and financial planning when taking out a mortgage or other large loan.

4. Using the Calculator

Tips: Enter the principal amount in USD, annual interest rate as a percentage (e.g., 3.5 for 3.5%), and loan term in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Does this include property taxes and insurance?
A: No, this calculates only the principal and interest portion. Your actual mortgage payment may include escrow for taxes and insurance.

Q2: How does the loan term affect payments?
A: Longer terms result in lower monthly payments but higher total interest paid over the life of the loan.

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

Q4: Can I calculate payments for additional principal payments?
A: This calculator shows the standard payment. Extra payments would require a different amortization calculation.

Q5: How accurate is this calculator?
A: It provides precise calculations for fixed-rate loans, but actual lender payments may vary slightly due to rounding methods.