Home Loan Calculator Repayment

Loan Repayment Formula:

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

Loan Amount (P):

Annual Interest Rate:

Loan Term:

years

Payments Per Year:

Payment Amount (PMT):

Unit Converter ▲

Unit Converter ▼

From:	To:

1. What is the Loan Repayment Formula?

The loan repayment formula calculates the fixed periodic payment required to pay off a loan over a specified term, including both principal and interest components.

2. How Does the Calculator Work?

The calculator uses the standard loan repayment formula:

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

Where:

\( PMT \) — Periodic payment amount
\( P \) — Principal loan amount
\( r \) — Periodic interest rate (annual rate divided by number of payments per year)
\( n \) — Total number of payments (term in years multiplied by payments per year)

Explanation: The formula accounts for compound interest over the life of the loan, ensuring each payment covers both interest and principal reduction.

3. Importance of Loan Repayment Calculation

Details: Understanding your loan payments helps with budgeting, comparing loan options, and planning your financial future. It shows how much interest you'll pay over the life of the loan.

4. Using the Calculator

Tips: Enter the loan amount in dollars, annual interest rate as a percentage (e.g., 5.25 for 5.25%), loan term in years, and select your payment frequency.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between monthly and bi-weekly payments?
A: Bi-weekly payments (26 per year) can save interest and pay off your loan faster than monthly payments (12 per year), as you're making the equivalent of 13 monthly payments each year.

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

Q3: Why is my payment amount slightly different from my bank's calculation?
A: Some lenders use slightly different rounding methods or may include additional fees in their payment calculation.

Q4: Can I use this for other types of loans?
A: Yes, this formula works for any fixed-rate amortizing loan (car loans, personal loans, etc.), not just home loans.

Q5: How can I reduce my total interest paid?
A: Make extra principal payments when possible, choose a shorter loan term, or refinance to a lower interest rate.