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Personal Loan Payment Formula:
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The Personal Loan Payment Formula (PMT) calculates the fixed monthly payment required to repay a loan over a specified term. This formula accounts for the principal amount, interest rate, and loan duration to determine consistent payments.
The calculator uses the PMT formula:
Where:
Explanation: The formula calculates the fixed payment that will pay off the loan with interest over the specified term, with each payment containing both principal and interest components.
Details: Understanding your monthly payment helps with budgeting and financial planning. It allows you to compare loan offers and determine affordability before committing to a loan.
Tips: Enter the loan amount in USD, annual interest rate as a percentage (e.g., 5.25), and loan term in months. All values must be positive numbers.
Q1: What's the difference between APR and interest rate?
A: APR includes both interest rate and any loan fees, giving a more complete picture of loan cost. This calculator uses interest rate for basic payment calculation.
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 cost.
Q3: Are there other loan costs not included?
A: This calculator doesn't account for origination fees, late fees, or other potential loan charges that may affect total cost.
Q4: Why is my actual payment slightly different?
A: Lenders may use slightly different rounding methods or payment schedules (e.g., exact day counts between payments).
Q5: Can I use this for other types of loans?
A: This formula works for any fixed-rate, fully-amortizing loan including auto loans and mortgages, though specialized calculators may be better for those.