1. What is the Loan Payment Formula?

The loan payment formula calculates the fixed monthly payment required to fully repay a loan over its term, including both principal and interest components.

2. How Does the Calculator Work?

The calculator uses the standard loan payment formula:

Where:

• \( PMT \) — Monthly payment amount
• \( P \) — Principal loan amount
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Total number of payments (loan term in months)

Explanation: The formula accounts for the time value of money, calculating equal payments that pay off both interest and principal over the loan term.

3. Importance of Loan Payment Calculation

Details: Understanding your monthly payment helps with budgeting and comparing different loan options. It shows how much you'll pay each month and the total interest over the loan term.

4. Using the Calculator

Tips: Enter the loan amount in dollars, annual interest rate as a percentage (e.g., 5.5 for 5.5%), 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. Actual mortgage payments may include property taxes and insurance.

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 fees and other loan costs, while the interest rate is just the cost of borrowing the principal.

Q4: Can I calculate payments for weekly or bi-weekly payments?
A: Yes, adjust the rate (divide annual rate by 52 for weekly or 26 for bi-weekly) and term accordingly.

Q5: How much will extra payments save me?
A: Extra payments reduce principal faster, saving interest and potentially shortening the loan term.