1. What is the Loan Payment Formula?

The loan payment formula calculates the fixed monthly payment required to pay off a loan with a fixed interest rate over a specified term. This is commonly used for personal loans, auto loans, and mortgages.

2. How Does the Calculator Work?

The calculator uses the loan payment formula:

Where:

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

Explanation: The formula accounts for both principal repayment and interest charges, with more interest paid earlier in the loan term.

3. Importance of Loan Calculation

Details: Understanding your monthly payment helps with budgeting and comparing different loan options. It also shows the total cost of borrowing.

4. Using the Calculator

Tips: Enter the loan amount in USD, annual interest rate as a percentage, and loan term in months. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How does interest rate affect my payment?
A: Higher rates increase both your monthly payment and total interest paid. Even small rate differences can significantly impact total loan cost.

Q2: What's better - shorter or longer loan term?
A: Shorter terms mean higher payments but less total interest. Longer terms reduce monthly payments but increase total interest.

Q3: Are there other loan costs not included here?
A: This calculator doesn't account for origination fees, prepayment penalties, or other loan charges which may affect total cost.

Q4: Can I use this for credit card payments?
A: No, this is for fixed-rate installment loans. Credit cards typically use different calculation methods.

Q5: How accurate is this calculator?
A: It provides accurate estimates for fixed-rate loans, but actual lender offers may vary slightly based on their specific terms.