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Loan Payment Formula:
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The Loan Payment Calculator helps you determine your monthly payment amount for a loan using the standard amortization formula. It calculates how much you'll pay each month based on your loan amount, interest rate, and loan term.
The calculator uses the PMT (Payment) formula:
Where:
Explanation: This formula calculates the fixed monthly payment required to fully pay off a loan over its term, including both principal and interest components.
Details: Knowing your exact monthly payment helps with budgeting, comparing loan offers, and understanding the total cost of borrowing. It allows you to make informed financial decisions about loan affordability.
Tips: Enter the loan amount in dollars, annual interest rate as a percentage (e.g., 5.25 for 5.25%), and loan term in months. All values must be positive numbers.
Q1: What types of loans can this calculator be used for?
A: This calculator works for most fixed-rate installment loans including personal loans, auto loans, and mortgages with fixed monthly payments.
Q2: Does this include taxes and insurance?
A: No, this calculates only the principal and interest portion. For mortgages, you'll need to add property taxes, insurance, and PMI separately.
Q3: How does loan term affect my payment?
A: Longer terms result in lower monthly payments but higher total interest paid over the life of the loan.
Q4: What if I have a zero-interest loan?
A: The calculator handles zero-interest loans by dividing the principal by the number of payments.
Q5: Can I use this for credit card payments?
A: This formula is designed for installment loans with fixed terms. Credit cards typically use different calculation methods for minimum payments.