1. What is the Simple Loan Calculator?

The Simple Loan Calculator computes monthly payments for fixed-rate loans using the standard loan payment formula. It's applicable to home equity loans, personal loans, and other simple interest amortizing loans.

2. How Does the Calculator Work?

The calculator uses the loan payment formula:

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 monthly payment required to fully amortize (pay off) the loan over its term, including both principal and interest.

3. Importance of Loan Payment Calculation

Details: Understanding your monthly payment helps with budgeting and financial planning. It allows you to compare different loan options and determine affordability before committing to a loan.

4. Using the Calculator

Tips: Enter the principal amount in USD, annual interest rate as a percentage (e.g., 5.25 for 5.25%), and loan term in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Does this calculator work for mortgages?
A: Yes, it works for any fixed-rate, fully amortizing loan including mortgages, though specialized mortgage calculators may include additional factors like PMI.

Q2: What's not included in this calculation?
A: This doesn't account for variable rates, balloon payments, fees, or insurance that may be bundled with payments.

Q3: How does extra principal payment affect the loan?
A: Extra payments reduce principal faster, decreasing total interest paid and potentially shortening the loan term.

Q4: Why is my actual payment slightly different?
A: Lenders may use slightly different rounding methods or include fees not accounted for here.

Q5: Can I use this for interest-only loans?
A: No, this calculator assumes fully amortizing loans. Interest-only loans require a different calculation.