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Personal Loan Repayment Calc

Loan Payment Formula:

\[ PMT = P \times \frac{r \times (1 + r)^n}{(1 + r)^n - 1} \]

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%
months

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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. It's commonly used for personal loans, auto loans, and mortgages.

2. How Does the Calculator Work?

The calculator uses the standard loan payment formula:

\[ PMT = P \times \frac{r \times (1 + r)^n}{(1 + r)^n - 1} \]

Where:

Explanation: The formula accounts for compound interest over the life of the loan, ensuring each payment covers both interest and principal.

3. Importance of Loan Calculation

Details: Understanding your monthly payment helps with budgeting and comparing loan offers. It also shows the true cost of borrowing through total interest calculations.

4. Using the Calculator

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.

5. Frequently Asked Questions (FAQ)

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 borrowing costs.

Q2: How can I reduce my total interest paid?
A: Make larger payments when possible, choose a shorter loan term, or negotiate a lower interest rate.

Q3: Why does my payment stay the same but principal/interest ratio changes?
A: Early payments are mostly interest; as principal decreases, less interest accrues each month.

Q4: Are there loans with different payment structures?
A: Yes, some loans have interest-only periods or balloon payments, but this calculator assumes standard amortizing loans.

Q5: How accurate is this calculator?
A: It provides precise calculations for fixed-rate loans, but actual payments may vary slightly due to rounding or lender-specific policies.

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