1. What is the Loan Payment Formula?

The loan payment formula calculates fixed monthly payments for amortizing loans. It's widely used by financial institutions like Intuit Credit Karma to determine regular payments for personal loans, auto loans, and mortgages.

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 monthly payments
• \( PMT \) — Fixed monthly payment amount

Explanation: The formula accounts for both principal repayment and interest charges, with payments remaining constant throughout the loan term.

3. Importance of Loan Payment Calculation

Details: Accurate payment calculation helps borrowers understand their financial commitments, compare loan offers, and budget effectively for repayment.

4. Using the Calculator

Tips: Enter 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: Does this include taxes and insurance?
A: No, this calculates principal and interest only. Additional costs may apply for mortgages and other secured loans.

Q2: 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.

Q3: What's the difference between APR and interest rate?
A: APR includes fees and other loan costs, while interest rate is just the cost of borrowing the principal.

Q4: Can I use this for credit card payments?
A: This formula works best for fixed-rate installment loans. Credit cards typically use different calculation methods.

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