1. What is Loan Payment Calculation?

The loan payment calculation determines the fixed monthly payment required to repay a loan over a specified term, including both principal and interest components. It helps borrowers understand their repayment obligations.

2. How Does the Calculator Work?

The calculator uses the standard loan payment formula:

And calculates total interest with:

Where:

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

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 Loan Payment Calculation

Details: Understanding your monthly payment and total interest helps with budgeting, comparing loan offers, and making informed borrowing decisions.

4. Using the Calculator

Tips: Enter the loan amount in dollars, annual interest rate as a percentage (without % sign), and loan term in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why does a small rate change affect payments so much?
A: Interest compounds over time, so even small rate differences significantly impact total interest paid, especially on long-term loans.

Q2: How can I reduce total interest paid?
A: Make larger payments when possible, choose a shorter loan term, or negotiate a lower interest rate.

Q3: Does this calculator account for fees?
A: No, this calculates principal and interest only. Actual payments may include insurance, taxes, or other fees.

Q4: What's the difference between APR and interest rate?
A: APR includes fees and other loan costs, while the interest rate is just the cost of borrowing the principal.

Q5: How does extra payment affect my loan?
A: Extra payments reduce principal faster, decreasing total interest and potentially shortening the loan term.