1. What is the Loan Payment Formula?

The loan payment formula calculates the fixed monthly payment required to fully 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:

• \( PMT \) — Monthly payment amount
• \( P \) — 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, ensuring each payment covers both interest and principal reduction.

3. Understanding Amortization

Details: Amortization is the process of spreading out loan payments over time. Early payments consist mostly of interest, while later payments apply more toward principal reduction.

4. Using the Calculator

Tips: Enter the loan amount in USD, annual interest rate as a percentage, and loan term in years. The calculator will show your monthly payment and full amortization schedule.

5. Frequently Asked Questions (FAQ)

Q1: How does interest rate affect my payment?
A: Higher rates increase both your monthly payment and total interest paid. Even a 0.5% difference can significantly impact long-term costs.

Q2: What's the benefit of a shorter loan term?
A: Shorter terms mean higher monthly payments but less total interest paid and faster equity building.

Q3: Can I pay extra to reduce my loan term?
A: Yes, additional principal payments reduce your balance faster and can shorten your loan term, saving interest.

Q4: Are mobile home loans different from mortgages?
A: Mobile home loans often have higher interest rates and shorter terms than traditional mortgages, as they depreciate like vehicles.

Q5: What costs aren't included in this calculation?
A: This calculates principal and interest only. Real payments may include insurance, taxes, and fees depending on your loan terms.