1. What is the Loan Payment Formula?

The loan payment formula calculates the fixed monthly payment required to repay a loan over a specified term, including both principal and interest. This is the standard formula used by banks for personal loans.

2. How Does the Calculator Work?

The calculator uses the loan payment formula:

Where:

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

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

3. Importance of Loan Calculation

Details: Understanding your monthly payment helps with budgeting and comparing loan offers. It also shows the true cost of borrowing through the total interest calculation.

4. Using the Calculator

Tips: Enter the loan amount in USD, annual interest rate as a percentage, and loan term in months. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Does this include loan fees?
A: No, this calculates only principal and interest. Some loans may have additional fees that aren't included here.

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

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 principal. This calculator uses the interest rate.

Q4: Can I use this for mortgage calculations?
A: The formula is the same, but mortgages often have different terms and additional costs not accounted for here.

Q5: How accurate is this calculator?
A: It provides precise calculations based on the inputs, but actual loan terms may vary slightly based on lender policies.