Loan Amortization Calculator Bret Whissel Formula

Bret Whissel's Amortization Formula:

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

Monthly Payment (PMT):

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1. What is Bret Whissel's Amortization Formula?

Bret Whissel's formula is a standard equation for calculating loan amortization payments. It provides the fixed monthly payment required to pay off a loan with interest over a specified term.

2. How Does the Calculator Work?

The calculator uses Bret Whissel's amortization formula:

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

Where:

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

Explanation: The formula accounts for compound interest over the life of the loan, calculating the fixed payment needed to pay off both principal and interest.

3. Importance of Loan Amortization

Details: Understanding loan amortization helps borrowers see how much of each payment goes toward principal vs. interest, plan their finances, and compare different loan options.

4. Using the Calculator

Tips: Enter the principal amount in USD, annual interest rate as a percentage (e.g., 5.25), and loan term in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How does the interest rate affect my payment?
A: Higher interest rates increase your monthly payment and total interest paid. Even small rate differences can significantly impact long-term costs.

Q2: What's the difference between principal and interest?
A: Principal is the original loan amount. Interest is the cost of borrowing. Early payments are mostly interest; later payments apply more to principal.

Q3: How does loan term affect payments?
A: Longer terms reduce monthly payments but increase total interest paid. Shorter terms mean higher payments but less total interest.

Q4: Are there other costs not included in this calculation?
A: This calculates principal and interest only. Real payments may include taxes, insurance, or fees depending on the loan type.

Q5: Can I use this for different payment frequencies?
A: This calculates monthly payments. For biweekly or other frequencies, adjustments to the rate and term calculations would be needed.