1. What is the Personal Loan Payment Formula?

The Personal Loan Payment Formula (PMT) 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 periodic payments.

2. How Does the Calculator Work?

The calculator uses the PMT formula:

Where:

• \( P \) — Principal loan amount (USD)
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Number of monthly payments (loan term in months)
• \( PMT \) — 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 financial planning. It allows you to compare loan offers and determine affordability before borrowing.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

Q1: How does loan term affect monthly payments?
A: Longer terms reduce monthly payments but increase total interest paid. Shorter terms have higher payments but lower total interest.

Q2: What's the difference between interest rate and APR?
A: APR includes both interest rate and any fees, providing a more complete cost picture. Always compare APRs when shopping for loans.

Q3: Can I pay off my loan early?
A: Most loans allow early repayment, but some charge prepayment penalties. Check your loan agreement for details.

Q4: Why is my first payment different?
A: First payments may vary due to the loan start date not aligning with a full month or initial fees being included.

Q5: How can I reduce my total interest paid?
A: Make additional principal payments when possible, choose a shorter term, or negotiate a lower interest rate.