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 for most fixed-rate loans including mortgages, auto loans, and personal loans.

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)
• \( n \) — Number of monthly 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 both principal and interest by the end of the term.

3. Importance of Loan Payment Calculation

Details: Understanding your monthly payment helps with budgeting, comparing loan offers, and determining how much you can afford to borrow.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

Q1: Does this work for all types of loans?
A: This works for standard fixed-rate loans. Adjustable-rate loans or interest-only loans require different calculations.

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

Q3: Are there other costs not included?
A: This calculates principal and interest only. Real payments may include taxes, insurance, or fees depending on the loan type.

Q4: What's the difference between APR and interest rate?
A: APR includes fees and other loan costs. This calculator uses the base interest rate for principal/interest calculations.

Q5: How accurate is this calculator?
A: It provides standard payment estimates. Actual loan terms may vary slightly based on lender-specific rounding methods.