1. What is the Loan Balance Equation?

The loan balance equation calculates the remaining balance on a personal loan after a certain number of payments have been made. It accounts for the principal amount, interest rate, total loan term, and payments already made.

2. How Does the Calculator Work?

The calculator uses the loan balance equation:

Where:

• \( P \) — Principal loan amount (USD)
• \( r \) — Monthly interest rate (decimal)
• \( n \) — Total number of payments (months)
• \( k \) — Number of payments already made
• \( B \) — Remaining balance (USD)

Explanation: The equation calculates how much principal remains after k payments by accounting for both the interest accrued and principal paid down over time.

3. Importance of Loan Balance Calculation

Details: Knowing your remaining loan balance helps with financial planning, refinancing decisions, and understanding how much you would need to pay to completely pay off the loan.

4. Using the Calculator

Tips: Enter the original loan amount, monthly interest rate (as decimal), total loan term in months, and number of payments already made. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How do I convert APR to monthly rate?
A: Divide the annual percentage rate (APR) by 12 (for months) and by 100 to convert to decimal. Example: 6% APR = 0.06/12 = 0.005 monthly rate.

Q2: Does this account for extra payments?
A: No, this calculates the standard amortization schedule. Extra payments would require a different calculation.

Q3: Why does my balance decrease slowly at first?
A: In amortizing loans, early payments are mostly interest. The principal portion increases with each payment.

Q4: Can I use this for mortgage loans?
A: While the principle is similar, mortgages often have different terms and may require more specialized calculators.

Q5: What if I want to pay off early?
A: The calculator shows exactly how much you would need to pay to completely settle the loan at any point in time.