Loan Amortization Calculator Whissel

Loan 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 the Loan Amortization Calculator?

The Loan Amortization Calculator based on Bret Whissel's formula calculates the fixed monthly payment required to pay off a loan over a specified term, including both principal and interest.

2. How Does the Calculator Work?

The calculator uses the 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 divided by 12)
\( n \) — Number of monthly payments (loan term in years × 12)
\( PMT \) — Fixed monthly payment (USD)

Explanation: The formula calculates the fixed payment needed to completely pay off a loan over its term, accounting for both principal and interest.

3. Importance of Loan Amortization

Details: Understanding your monthly payment helps with budgeting and financial planning. It shows how much goes toward principal vs. interest over the life of the loan.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

Q1: What types of loans can this calculator be used for?
A: This works for fixed-rate mortgages, auto loans, personal loans, and other installment loans with fixed payments.

Q2: Does this include taxes and insurance?
A: No, this calculates only principal and interest. For mortgages, you'll need to add property taxes and insurance separately.

Q3: How does the payment change with different terms?
A: Shorter terms mean higher monthly payments but less total interest paid. Longer terms reduce monthly payments but increase total interest.

Q4: What's the difference between interest rate and APR?
A: The interest rate is the cost of borrowing the principal. APR includes fees and other loan costs, giving a more complete picture of loan cost.

Q5: Can I see an amortization schedule?
A: This calculator shows only the monthly payment. For a full schedule showing principal/interest breakdown each month, use an amortization schedule tool.