Loan Payment Formula:
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The loan payment formula calculates the fixed monthly payment required to pay off a loan over a specified term. It accounts for both principal and interest payments, ensuring the loan is fully amortized by the end of the term.
The calculator uses the standard loan payment formula:
Where:
Explanation: The formula calculates the fixed payment needed to pay off the loan while accounting for compound interest over the loan term.
Details: Understanding your monthly payment helps with budgeting and financial planning. It also allows you to compare different loan offers and understand the true cost of borrowing.
Tips: Enter the principal amount in USD, annual interest rate as a percentage, and loan term in months. All values must be positive numbers.
Q1: Does this calculator account for fees?
A: No, this calculates only principal and interest. Additional fees (origination, insurance, etc.) would increase your actual payment.
Q2: What's the difference between APR and interest rate?
A: APR includes both interest rate and certain fees, giving a more complete picture of loan cost. This calculator uses the simple interest rate.
Q3: 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 cost.
Q4: Can I use this for mortgage calculations?
A: Yes, though mortgages often have additional factors like taxes and insurance that aren't included here.
Q5: How accurate is this calculator?
A: It provides precise calculations based on the inputs, but actual loan terms may vary slightly based on lender policies.