1. What is the Loan Payment Formula?

The loan payment formula calculates the fixed monthly payment required to fully amortize a loan over its term. It accounts for the principal amount, interest rate, and loan duration.

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)
• \( n \) — Number of payments (term in years × 12)
• \( PMT \) — Monthly payment amount (USD)

For extra payments: The calculator also shows how additional payments reduce the principal faster, saving interest and shortening the loan term.

3. Importance of Extra Payments

Details: Even small extra payments can significantly reduce total interest paid and shorten the loan term, often by years.

4. Using the Calculator

Tips: Enter the loan amount, interest rate, term, and optional extra payment. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How do extra payments save money?
A: Extra payments reduce the principal faster, which means less interest accumulates over time.

Q2: Should I pay extra principal or get a shorter term?
A: Mathematically similar, but extra payments offer more flexibility than shorter-term loans.

Q3: Are there loans where extra payments don't help?
A: Some loans have prepayment penalties, but most conventional loans allow extra payments.

Q4: How much can I save with extra payments?
A: Savings depend on loan amount, rate, and extra payment amount. Even $50/month can save thousands.

Q5: Should I pay extra or invest instead?
A: Depends on your loan rate vs. expected investment returns. Paying off high-interest debt usually comes first.