Personal Bank Loans Calculator

Loan Payment Formula:

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

Monthly Payment (PMT):

Total Payment:

Total Interest:

Unit Converter ▲

Unit Converter ▼

From:	To:

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. It accounts for the principal amount, interest rate, and loan duration to determine equal monthly payments that will fully amortize the loan.

2. How Does the Calculator Work?

The calculator uses the standard 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 ÷ 12)
\( n \) — Number of monthly payments (years × 12)
\( PMT \) — Monthly payment amount (USD)

Explanation: The formula calculates the fixed payment that will pay off the loan with interest by the end of the term, with each payment consisting of both principal and interest components.

3. Importance of Loan Calculation

Details: Understanding your loan payments helps with budgeting and financial planning. It allows you to compare different loan options and understand the total cost of borrowing.

4. Using the Calculator

Tips: Enter the loan amount 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: Why does my payment include so much interest at first?
A: Loans use amortization where early payments are mostly interest. As the principal decreases, more of each payment goes toward principal.

Q2: How can I reduce my total interest paid?
A: You can reduce total interest by choosing a shorter loan term, making extra payments, or securing a lower interest rate.

Q3: What's the difference between APR and interest rate?
A: APR includes both interest rate and other loan fees, giving a more complete picture of borrowing costs.

Q4: Are there loans with different payment structures?
A: Yes, some loans have interest-only periods or balloon payments, but this calculator assumes fully amortizing fixed payments.

Q5: How accurate is this calculator?
A: It provides standard loan payment estimates. Actual payments may vary slightly due to rounding or specific lender policies.