1. What is the Loan Payment Formula?

The loan payment formula calculates the fixed monthly payment required to pay off a loan with interest over a specified term. It considers the principal amount, interest rate, and loan duration.

2. How Does the Calculator Work?

The calculator uses the loan payment formula:

Where:

• \( PMT \) — Monthly payment (USD)
• \( PV \) — Principal loan amount (USD)
• \( r \) — Monthly interest rate (decimal)
• \( n \) — Total number of payments (months)

Explanation: The formula accounts for both principal repayment and interest charges, calculating a fixed payment that fully amortizes the loan over its term.

3. Importance of Loan Payment Calculation

Details: Accurate payment calculation is crucial for budgeting, comparing loan offers, and understanding the total cost of borrowing.

4. Using the Calculator

Tips: Enter principal in USD, annual interest rate in percentage, and loan term in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

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

Q2: 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 interest.

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

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: It provides precise calculations for fixed-rate loans. Actual payments may vary slightly due to rounding practices of specific lenders.