Bankrate Loan Repayment Calculator Aussie

Loan Payment Formula:

\[ PMT = P \times \frac{r \times (1 + r)^n}{(1 + r)^n - 1} \]

Monthly Payment (PMT):

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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 the standard formula used by most financial institutions.

2. How Does the Calculator Work?

The calculator uses the loan payment formula:

\[ PMT = P \times \frac{r \times (1 + r)^n}{(1 + r)^n - 1} \]

Where:

\( P \) — Principal loan amount (USD)
\( r \) — Monthly interest rate (annual rate divided by 12, in decimal)
\( n \) — Total number of payments (loan 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 both principal and interest by the end of the term.

3. Importance of Loan Payment Calculation

Details: Understanding your monthly payment helps with budgeting and financial planning. It allows you to compare different loan options and choose terms that fit your financial situation.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

Q1: Does this calculator account for Australian dollar loans?
A: No, this calculator uses USD as specified in the Bankrate formula. For AUD loans, the calculation method is the same but currency would be different.

Q2: Are there other costs not included in this calculation?
A: Yes, this calculates principal and interest only. Real loans may have additional fees, insurance, or taxes.

Q3: How does changing the loan term affect payments?
A: Shorter terms mean higher monthly payments but less total interest paid. Longer terms reduce monthly payments but increase total interest.

Q4: What's the difference between interest rate and APR?
A: APR includes fees and other loan costs, while the interest rate is just the cost of borrowing the principal.

Q5: Can I use this for mortgage calculations?
A: Yes, this formula works for any fixed-rate amortizing loan, including mortgages.