Amortized Loan Payment Formula:
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The amortized loan payment formula calculates the fixed monthly payment required to pay off a loan over a specified term, including both principal and interest. This formula is widely used for mortgages, car loans, and personal loans.
The calculator uses the amortized loan payment formula:
Where:
Explanation: The formula accounts for the time value of money, calculating equal payments that cover both interest and principal over the loan term.
Details: Accurate payment calculation helps borrowers understand their financial commitments, compare loan offers, and budget effectively for major purchases.
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.
Q1: What's the difference between amortized and interest-only loans?
A: Amortized loans pay both principal and interest with each payment, while interest-only loans only pay interest during the initial period.
Q2: How does loan term affect monthly payments?
A: Longer terms reduce monthly payments but increase total interest paid over the life of the loan.
Q3: What's included in the monthly payment?
A: This calculator shows principal and interest only. Actual payments may include taxes, insurance, and fees.
Q4: How accurate is this calculator?
A: It provides precise calculations for fixed-rate loans. Variable-rate loans require more complex calculations.
Q5: Can I calculate payments for extra payments?
A: This calculator shows standard payments. Additional payments would require an amortization schedule calculator.