1. What is the Loan Payment Formula?

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

2. How Does the Calculator Work?

The calculator uses the standard loan payment formula:

Where:

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

Explanation: The formula accounts for compound interest over the life of the loan, calculating a payment that will pay off the loan exactly by the end of the term.

3. Importance of Loan Calculation

Details: Understanding your monthly payment helps with budgeting and financial planning. The amortization graph shows how much of each payment goes toward principal vs. interest over time.

4. Using the Calculator

Tips: Enter the principal amount in USD, annual interest rate as a percentage (e.g., 3.5 for 3.5%), and loan term in years. The calculator will show your monthly payment and an amortization graph.

5. Frequently Asked Questions (FAQ)

Q1: Why does the interest portion decrease over time?
A: As you pay down the principal, the interest is calculated on a smaller remaining balance, so more of each payment goes toward principal.

Q2: How can I pay less interest overall?
A: Make extra principal payments, choose a shorter loan term, or secure a lower interest rate.

Q3: What's the difference between APR and interest rate?
A: APR includes both interest rate and loan fees, giving a more complete cost picture.

Q4: Are there other loan payment structures?
A: Some loans have interest-only periods or balloon payments, but this calculator assumes standard amortizing loans.

Q5: How accurate is this calculator?
A: It provides precise calculations for fixed-rate loans, but actual payments may vary slightly due to rounding or specific lender policies.