Bankrate Simple Loan Calculator With Amortization

Loan Payment Formula:

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

Monthly Payment (PMT):

Total Payment:

Total Interest:

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1. What is the Loan Payment Formula?

The loan payment formula calculates the fixed monthly payment required to fully amortize a loan over its term. This is the standard formula used by banks and financial institutions for fixed-rate loans.

2. How Does the Calculator Work?

The calculator uses the standard 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 ÷ 12)
\( n \) — Number of monthly payments (term in years × 12)
\( PMT \) — Fixed monthly payment amount (USD)

Explanation: The formula accounts for compound interest over the life of the loan, ensuring each payment covers both principal and interest.

3. Understanding Loan Amortization

Details: Amortization is the process of paying off a loan through regular payments. Early payments consist mostly of interest, while later payments apply more toward the principal.

4. Using the Calculator

Tips: Enter the loan amount in USD, annual interest rate as a percentage (e.g., 5.25 for 5.25%), and loan term in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between interest rate and APR?
A: The interest rate is the cost of borrowing the principal, while APR includes the interest rate plus other loan fees, giving a more complete cost picture.

Q2: How can I pay less interest on my loan?
A: You can pay less interest by choosing a shorter loan term, making extra principal payments, or securing a lower interest rate.

Q3: Why does my payment stay the same but interest/principal amounts change?
A: This is how amortization works - as you pay down principal, less interest accrues each month so more of your payment goes toward principal.

Q4: How accurate is this calculator?
A: This provides standard amortization calculations. Actual loan terms may include additional fees or insurance that affect total costs.

Q5: Can I see an amortization schedule?
A: This calculator shows the overall totals. For a month-by-month breakdown, use a full amortization schedule calculator.