Repayment Calculator On Personal Loan

Loan Payment Formula:

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

Monthly Payment (PMT):

Total Payment:

Total Interest:

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1. What is the Loan Payment Formula?

The loan payment formula 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 the periodic payment amount.

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:

\( P \) — Principal loan amount (USD)
\( r \) — Monthly interest rate (annual rate ÷ 12)
\( n \) — Number of monthly payments (term in years × 12)
\( PMT \) — 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 committing to a loan.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

Q1: Why does the monthly payment include so much interest at first?
A: Loans use amortization where early payments are mostly interest. As the principal decreases, more of each payment goes toward principal.

Q2: How can I reduce my total interest paid?
A: You can reduce total interest by choosing a shorter loan term, making extra payments, or securing a lower interest rate.

Q3: What's the difference between APR and interest rate?
A: The interest rate is the cost of borrowing, while APR includes fees and other loan costs to show the total annual cost.

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

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