1. What is the Bankrate Loan Payment Formula?

The Bankrate loan payment formula calculates the fixed monthly payment required to repay a loan over a specified term, including interest. It's the standard formula used for amortizing loans like mortgages, auto loans, and personal loans.

2. How Does the Calculator Work?

The calculator uses the Bankrate formula:

Where:

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

Explanation: The formula accounts for both principal repayment and interest charges, distributing payments equally over the loan term.

3. Importance of Loan Payment Calculation

Details: Accurate payment calculation helps borrowers understand their financial commitments, compare loan offers, and budget effectively.

4. Using the Calculator

Tips: Enter principal in USD, annual interest rate as a percentage (e.g., 5.25), and loan term in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Does this include taxes and insurance?
A: No, this calculates only principal and interest. For complete payment estimates, add property taxes, insurance, and other fees.

Q2: How does extra payment affect the loan?
A: Extra payments reduce principal faster, saving interest and potentially shortening the loan term.

Q3: What's the difference between APR and interest rate?
A: APR includes interest plus fees, while the interest rate is just the cost of borrowing principal.

Q4: How does loan term affect payments?
A: Longer terms reduce monthly payments but increase total interest paid over the life of the loan.

Q5: Can this be used for credit cards?
A: No, credit cards typically use different calculation methods with variable rates and minimum payments.