1. What is the PMT Formula?

The PMT (Payment) formula calculates the fixed monthly payment required to pay off a loan over a specified period, including both principal and interest components.

2. How Does the Calculator Work?

The calculator uses the PMT equation:

Where:

• \( P \) — Principal loan amount ($)
• \( r \) — Monthly interest rate (decimal)
• \( n \) — Number of monthly payments

Explanation: The formula accounts for compound interest over the loan term, calculating the fixed payment needed to fully amortize the loan.

3. Importance of PMT Calculation

Details: Knowing your exact monthly payment helps with budgeting, loan comparison, and understanding the total cost of borrowing.

4. Using the Calculator

Tips: Enter loan amount in dollars, monthly interest rate as a decimal (e.g., 0.01 for 1%), and number of monthly payments. All values must be positive.

5. Frequently Asked Questions (FAQ)

Q1: How do I convert APR to monthly rate?
A: Divide the annual percentage rate by 12 (months) and convert from percentage to decimal (e.g., 12% APR = 0.12/12 = 0.01 monthly rate).

Q2: Does this include taxes and insurance?
A: No, this calculates only principal and interest. Actual payments may include additional costs like property taxes or insurance.

Q3: What's the difference between PMT and P+I?
A: PMT is the total payment (principal + interest). In early payments, more goes to interest; later more goes to principal.

Q4: Can I use this for any type of loan?
A: This works for standard amortizing loans (mortgages, personal loans). It doesn't apply to interest-only loans or credit cards.

Q5: How accurate is this calculator?
A: It provides mathematically exact results for fixed-rate loans. Actual payments may vary slightly due to rounding in lender calculations.