Direct Lending Loan Calculator

Direct Lending Loan Formula:

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

Monthly Payment (PMT):

Unit Converter ▲

Unit Converter ▼

From:	To:

1. What is a Direct Lending Loan?

A direct lending loan is a type of loan provided by non-bank lenders directly to borrowers, often with different terms and conditions than traditional bank loans. These loans are typically used for personal or business purposes.

2. How Does the Calculator Work?

The calculator uses the direct lending 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)
\( n \) — Number of monthly payments (loan term in months)
\( PMT \) — Monthly payment amount (USD)

Explanation: This formula calculates the fixed monthly payment required to fully repay a loan over its term, including both principal and interest components.

3. Importance of Loan Payment Calculation

Details: Understanding your monthly payment helps with budgeting and financial planning. It allows you to compare different loan offers and determine affordability before committing to a loan.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between direct lending and bank loans?
A: Direct lending often comes from non-bank financial institutions and may have more flexible terms but potentially higher interest rates than traditional bank loans.

Q2: Does this calculator account for loan fees?
A: No, this calculates the base payment. Additional fees (origination, processing, etc.) would increase your total cost.

Q3: 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 cost.

Q4: What if I make extra payments?
A: Extra payments reduce principal faster, potentially saving interest and shortening the loan term. This calculator assumes fixed regular payments.

Q5: Are there prepayment penalties?
A: Some direct lenders charge prepayment penalties. Check your loan agreement as this calculator doesn't account for them.