1. What is the Monthly Payment Formula?

The monthly payment formula calculates the fixed payment amount required to repay a loan over its term, including both principal and interest components.

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)
• \( n \) — 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 a fixed payment that fully amortizes the loan by the end of the term.

3. Importance of Accurate Payment Calculation

Details: Knowing your exact monthly payment helps with budgeting and financial planning, and allows you to compare different loan options effectively.

4. Using the Calculator

Tips: Enter the principal amount in USD, annual interest rate as a percentage (e.g., 3.5 for 3.5%), and loan term in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Does this include property taxes and insurance?
A: No, this calculates only the principal and interest portion. A complete mortgage payment may include additional amounts for taxes and insurance.

Q2: How does changing the term affect payments?
A: Longer terms reduce monthly payments but increase total interest paid. Shorter terms have higher payments but lower total interest.

Q3: What's the difference between APR and interest rate?
A: The interest rate is the base cost of borrowing, while APR includes fees and other loan costs to show the true annual cost.

Q4: Can I calculate payments for different frequencies?
A: This calculator assumes monthly payments. For biweekly or weekly payments, the formula would need adjustment.

Q5: How accurate is this calculator?
A: It provides mathematically precise results for fixed-rate loans. Actual lender payments may vary slightly due to rounding methods.