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. The formula accounts for compound interest and is used for mortgages, auto loans, and other installment loans.

2. How Does the Calculator Work?

The calculator uses the standard loan payment formula:

Where:

• \( PMT \) — Monthly payment amount
• \( P \) — Principal loan amount
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Number of payments (loan term in years × 12)

Explanation: The formula calculates the fixed payment that pays off the loan exactly over the term, accounting for compound interest.

3. Importance of Extra Payments

Details: Making extra payments reduces the principal faster, decreasing both the total interest paid and the loan term. Even small additional amounts can lead to significant savings.

4. Using the Calculator

Tips: Enter the loan amount in USD, annual interest rate as a percentage, loan term in years, and any additional monthly payment you plan to make. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How much can I save with extra payments?
A: Even $50-$100 extra per month can save thousands in interest and reduce the loan term by years, depending on the loan amount and rate.

Q2: Should I pay extra principal or refinance?
A: If your rate is already low, extra payments may be better than refinancing. Compare savings from both options.

Q3: Are there prepayment penalties?
A: Most Florida loans don't have prepayment penalties, but check your loan documents to be sure.

Q4: When is the best time to make extra payments?
A: Earlier in the loan term saves more interest since more of each payment goes toward interest initially.

Q5: How does Florida's tax situation affect loans?
A: Florida has no state income tax, so mortgage interest deductions are only applicable to federal taxes.