Simple Loan Calculator With Amortization Table

Loan Payment Formula:

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

Monthly Payment (PMT):

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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.

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)
\( PMT \) — Fixed monthly payment amount

Explanation: The formula accounts for compound interest over the life of the loan, calculating the fixed payment needed to pay off the loan completely by the end of the term.

3. Understanding the Amortization Table

Details: The amortization table shows how each payment is split between principal and interest, and how the loan balance decreases over time. Early payments are mostly interest, while later payments are mostly principal.

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 interest portion decrease over time?
A: As you pay down the principal, the interest is calculated on a smaller remaining balance, so the interest portion of each payment decreases.

Q2: How can I pay less interest overall?
A: You can pay less total interest by choosing a shorter loan term or making extra principal payments when possible.

Q3: What's the difference between APR and interest rate?
A: The interest rate is the cost of borrowing the principal, while APR includes the interest rate plus other loan fees.

Q4: Why is my first payment different from the calculated PMT?
A: Some lenders calculate interest from the date of disbursement to the first payment date, which may result in a slightly different first payment.

Q5: Can I use this for mortgage calculations?
A: Yes, this calculator works for any fixed-rate, fully amortizing loan including mortgages, though mortgages often have additional fees.