1. What is the Loan Balance Equation?

The loan balance equation calculates the remaining balance on a loan after a late payment, accounting for accrued interest. It's essential for understanding how late payments affect your total loan amount.

2. How Does the Calculator Work?

The calculator uses the loan balance equation:

Where:

• \( Previous\ Balance \) — The loan balance before payment (USD)
• \( r \) — Monthly interest rate (decimal)
• \( Payment \) — Amount paid (USD)

Explanation: The equation first calculates the new balance with accrued interest, then subtracts the payment amount to determine the remaining balance.

3. Importance of Accurate Loan Balance Calculation

Details: Calculating the exact loan balance after late payments helps borrowers understand the true cost of late payments and plan their finances accordingly.

4. Using the Calculator

Tips: Enter the previous balance in USD, monthly interest rate as a decimal (e.g., 0.01 for 1%), and payment amount in USD. All values must be valid (positive numbers).

5. Frequently Asked Questions (FAQ)

Q1: How does a late payment affect my loan balance?
A: Late payments typically result in additional interest charges, increasing the total amount you owe before your payment is applied.

Q2: What's the difference between APR and monthly rate?
A: APR is the annual rate, while the monthly rate is APR divided by 12. This calculator uses the monthly rate.

Q3: Can this calculator be used for credit cards?
A: Yes, it can be used for any loan or credit product where interest accrues monthly.

Q4: What if my payment is less than the accrued interest?
A: Your balance will increase despite making a payment, which is known as negative amortization.

Q5: How can I avoid late payment penalties?
A: Always make at least the minimum payment by the due date, and consider setting up automatic payments.