1. What is the Loan Balance Equation?

The loan balance equation calculates the remaining balance on a loan when extra payments are made. It helps borrowers understand how much they still owe after making additional payments.

2. How Does the Calculator Work?

The calculator uses the loan balance equation:

Where:

• \( RB \) — Remaining balance ($)
• \( PMT \) — Monthly payment amount ($)
• \( r \) — Monthly interest rate (decimal)
• \( m \) — Number of remaining periods (months)

Explanation: The equation accounts for the present value of remaining payments considering the interest rate.

3. Importance of Loan Balance Calculation

Details: Knowing your remaining balance helps with financial planning, refinancing decisions, and understanding the impact of extra payments on your loan term.

4. Using the Calculator

Tips: Enter your regular monthly payment amount, monthly interest rate (annual rate ÷ 12), and the number of remaining payments. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How do I convert annual rate to monthly?
A: Divide your annual interest rate by 12 (months) and convert to decimal (e.g., 6% annual = 0.06/12 = 0.005 monthly).

Q2: Does this account for extra payments?
A: Yes, this calculates the remaining balance after accounting for any extra payments you've made.

Q3: What if my payments vary?
A: This assumes consistent payments. For varying payments, you would need a more complex amortization schedule.

Q4: Can I use this for any type of loan?
A: This works for standard amortizing loans (mortgages, car loans, etc.) but not for interest-only or balloon payment loans.

Q5: How accurate is this calculation?
A: It's mathematically precise for fixed-rate loans with consistent payments. For variable-rate loans, it provides an estimate based on current rate.