1. What is the Loan Payment Formula?

The loan payment formula calculates the fixed monthly payment required to fully repay a loan with interest over a specified term. This is the standard calculation used for most installment loans including credit cards with fixed repayment plans.

2. How Does the Calculator Work?

The calculator uses the loan payment formula:

Where:

• \( PMT \) — Monthly payment amount
• \( P \) — Principal loan amount
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Number of monthly payments (term in months)

Explanation: The formula accounts for compound interest over the life of the loan, calculating a fixed payment that covers 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 terms.

4. Using the Calculator

Tips: Enter the principal amount, annual interest rate (as a percentage), and loan term in months. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Does this work for credit card minimum payments?
A: No, credit card minimum payments are typically calculated differently (often 1-3% of balance plus interest).

Q2: How does the term affect my payment?
A: Longer terms reduce monthly payments but increase total interest paid. Shorter terms have higher payments but lower total cost.

Q3: What if I make extra payments?
A: Extra payments reduce principal faster, saving interest and potentially shortening the loan term.

Q4: Are fees included in this calculation?
A: No, this calculates principal and interest only. Additional fees would increase your actual payment.

Q5: How accurate is this calculator?
A: It provides the standard mathematical calculation, but your actual payment may vary slightly due to rounding or lender-specific policies.