Short Term Loan Calculator

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 Short Term Loan Calculator?

The Short Term Loan Calculator computes monthly payments for loans with terms typically between 1-12 months. It uses the standard loan payment formula to determine the fixed monthly payment amount based on principal, interest rate, and loan term.

2. How Does the Calculator Work?

The calculator uses the 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 divided by 12, in decimal)
\( n \) — Number of monthly payments (loan term in months)
\( PMT \) — Fixed monthly payment amount (USD)

Explanation: The formula accounts for both principal repayment and interest charges, spreading the payments equally over the loan term.

3. Importance of Loan Payment Calculation

Details: Understanding your monthly payment helps with budgeting and ensures the loan terms are affordable before committing to the agreement.

4. Using the Calculator

Tips: Enter the principal amount in USD, annual interest rate as a percentage (e.g., 5 for 5%), and loan term in months (1-12). All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between short-term and long-term loans?
A: Short-term loans typically have terms of 1-12 months, while long-term loans extend for years. Short-term loans often have higher monthly payments but lower total interest.

Q2: Does this calculator account for fees?
A: No, this calculates only the principal and interest payments. Any loan origination fees or other charges would increase the total cost.

Q3: What's a typical interest rate for short-term loans?
A: Rates vary widely but are typically higher than long-term loans, often ranging from 5% to 36% APR depending on creditworthiness and lender.

Q4: Can I pay off a short-term loan early?
A: This depends on the lender's terms. Some charge prepayment penalties while others allow early payoff with interest savings.

Q5: How accurate is this calculator?
A: It provides mathematically accurate results for fixed-rate, amortizing loans. Actual loan terms may vary based on lender-specific policies.