1. What is the Loan Payment Formula?

The loan payment formula calculates the fixed monthly payment required to repay a loan over a specified term, including principal and interest. It's based on your loan amount, interest rate (determined by credit score), and repayment period.

2. How Does the Calculator Work?

The calculator uses the loan payment formula:

Where:

• \( P \) — Principal loan amount (USD)
• \( r \) — Monthly interest rate (based on credit score)
• \( n \) — Number of monthly payments
• \( PMT \) — Fixed monthly payment (USD)

Explanation: The formula accounts for compound interest over the life of the loan, with higher credit scores receiving better interest rates.

3. Importance of Loan Payment Calculation

Details: Understanding your monthly payment helps with budgeting and comparing loan offers. It also shows the true cost of borrowing when interest is included.

4. Using the Calculator

Tips: Enter the loan amount in USD, select your credit score range, and specify the loan term in months. All values must be valid (amount > 0, term 1-84 months).

5. Frequently Asked Questions (FAQ)

Q1: How does credit score affect my loan?
A: Higher credit scores qualify for lower interest rates, which reduce both your monthly payment and total interest paid.

Q2: What's the advantage of a shorter loan term?
A: Shorter terms mean higher monthly payments but less total interest paid over the life of the loan.

Q3: Are these rates guaranteed?
A: No, these are estimates. Actual rates depend on lender policies and current market conditions.

Q4: What other factors affect loan approval?
A: Lenders also consider income, debt-to-income ratio, employment history, and other financial factors.

Q5: Should I pay extra each month?
A: Even small extra payments can significantly reduce total interest and shorten your loan term.