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 components.

2. How Does the Calculator Work?

The calculator uses the standard loan payment formula:

Where:

• \( P \) — Principal loan amount (USD)
• \( r \) — Monthly interest rate (annual rate ÷ 12 ÷ 100)
• \( n \) — Number of monthly payments
• \( PMT \) — Fixed monthly payment amount

Explanation: The formula accounts for both the principal repayment and the interest charged on the outstanding balance each month.

3. Understanding Loan Payments

Details: Each payment consists of both interest (calculated on the remaining balance) and principal repayment. Early payments have higher interest components, while later payments have higher principal components.

4. Using the Calculator

Tips: Enter the total loan amount, annual interest rate (as a percentage), and loan term in months. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Does this include taxes and insurance?
A: No, this calculates only the principal and interest payment. Actual mortgage payments may include additional amounts for taxes and insurance.

Q2: What's the difference between APR and interest rate?
A: The interest rate is the base cost of borrowing, while APR includes additional fees and costs to give a more complete picture of loan cost.

Q3: How does loan term affect payments?
A: Longer terms reduce monthly payments but increase total interest paid over the life of the loan.

Q4: Can I use this for any type of loan?
A: This works for standard amortizing loans (mortgages, auto loans, personal loans). It doesn't work for interest-only loans or credit cards.

Q5: How accurate is this calculator?
A: This provides standard amortization calculations. Actual loan terms may vary slightly based on lender-specific rounding rules.