1. What is the Personal Loan Payment Formula?

The personal loan payment formula calculates the fixed monthly payment required to repay a loan over a specified term. This formula accounts for both principal and interest payments.

2. How Does the Calculator Work?

The calculator uses the loan payment formula:

Where:

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

Explanation: The formula calculates the fixed payment that covers both principal and interest each month, ensuring the loan is paid off by the end of the term.

3. Importance of Loan Payment Calculation

Details: Understanding your monthly payment helps with budgeting and comparing loan offers. It also shows the total cost of borrowing (principal + interest).

4. Using the Calculator

Tips: Enter the loan amount in USD, annual interest rate as a percentage, and loan term in months. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between interest rate and APR?
A: The interest rate is the cost of borrowing principal, while APR includes fees and other loan costs to show the total annual cost.

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: Are there prepayment penalties?
A: Some loans charge fees for early repayment. Check your loan terms as prepaying can save interest but may have penalties.

Q4: What's amortization?
A: The process of paying off debt through regular payments. Early payments are mostly interest, later payments mostly principal.

Q5: How accurate is this calculator?
A: It provides standard loan payment estimates. Actual loan terms may include additional fees or special conditions.