1. What is the Remaining Balance Formula?

The remaining balance formula calculates how much you still owe on a loan after making a series of payments, accounting for both principal and interest components of each payment.

2. How Does the Calculator Work?

The calculator uses the remaining balance formula:

Where:

• \( RB \) — Remaining balance ($)
• \( PMT \) — Monthly payment amount ($)
• \( r \) — Monthly interest rate (decimal)
• \( m \) — Number of remaining payment periods

Explanation: The formula accounts for the time value of money, calculating how much principal remains after a series of payments that include both interest and principal components.

3. Importance of Loan Balance Calculation

Details: Knowing your remaining balance helps with financial planning, refinancing decisions, and understanding how extra payments affect your loan payoff timeline.

4. Using the Calculator

Tips: Enter your regular monthly payment amount, monthly interest rate (annual rate ÷ 12), and number of remaining payments. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How do extra payments affect my remaining balance?
A: Extra payments reduce principal faster, decreasing both your remaining balance and total interest paid over the life of the loan.

Q2: Should I enter the interest rate as a percentage?
A: No, enter it as a decimal (e.g., 0.005 for 0.5% monthly rate, which is 6% annually).

Q3: Does this work for any type of loan?
A: This works for standard amortizing loans (mortgages, car loans, etc.) with fixed payments. It doesn't work for credit cards or interest-only loans.

Q4: How accurate is this calculation?
A: It's mathematically precise for loans with fixed payments and interest rates. Actual balances may differ if payments were missed or terms changed.

Q5: Can I use this to calculate payoff time with extra payments?
A: This shows current balance. To calculate payoff time with extra payments, you'd need a more complex amortization schedule.