Monthly Personal Loan Calculator

Loan Payment Formula:

\[ PMT = P \times \frac{r \times (1 + r)^n}{(1 + r)^n - 1} \]

Monthly Payment (PMT):

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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 both principal and interest. It's commonly used for personal loans, auto loans, and mortgages.

2. How Does the Calculator Work?

The calculator uses the loan payment formula:

\[ PMT = P \times \frac{r \times (1 + r)^n}{(1 + r)^n - 1} \]

Where:

\( P \) — Principal loan amount (USD)
\( r \) — Monthly interest rate (annual rate divided by 12)
\( n \) — Number of monthly payments (loan term in months)
\( PMT \) — Monthly payment amount (USD)

Explanation: The formula accounts for compound interest over the life of the loan, calculating a fixed payment that will completely pay off the loan by the end of the term.

3. Importance of Loan Payment Calculation

Details: Understanding your monthly payment helps with budgeting and ensures you can afford the loan before committing. It also allows comparison between different loan offers.

4. Using the Calculator

Tips: Enter the principal amount in USD, annual interest rate as a percentage (e.g., 5.25), and loan term in months. 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 if applicable.

Q2: How does loan term affect payments?
A: Longer terms reduce monthly payments but increase total interest paid. Shorter terms have higher payments but lower total interest.

Q3: What's the difference between APR and interest rate?
A: APR includes both interest rate and loan fees, giving a more complete cost picture. This calculator uses the interest rate.

Q4: Can I calculate payments for different compounding periods?
A: This calculator assumes monthly compounding. For other periods, the formula would need adjustment.

Q5: How accurate is this calculator?
A: It provides precise calculations based on the inputs, but actual loan terms may vary based on lender policies and creditworthiness.