1. What is a Loan Payment Calculator?

Definition: This calculator determines the fixed monthly payment required to repay a loan over a specified term, including interest.

Purpose: It helps borrowers understand their payment obligations for mortgages, car loans, personal loans, and other installment credit.

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

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

Explanation: The formula accounts for compound interest over the life of the loan to determine the fixed payment that will pay off the debt by the end of the term.

3. Importance of Loan Payment Calculation

Details: Understanding your monthly payment helps with budgeting, loan comparison, and determining how much you can afford to borrow.

4. Using the Calculator

Tips: Enter the loan amount, annual interest rate (as a percentage), and loan term in years. All values must be > 0.

5. Frequently Asked Questions (FAQ)

Q1: Does this include taxes and insurance?
A: No, this calculates principal and interest only. For mortgages, add property taxes and insurance separately.

Q2: How does loan term affect payments?
A: Longer terms reduce monthly payments but increase total interest paid over the life of the loan.

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

Q4: Can I use this for credit card payments?
A: Only if you're converting to a fixed-term installment loan. Credit cards typically use different calculation methods.

Q5: How accurate is this calculator?
A: It provides precise results for fixed-rate loans. Variable-rate loans would require more complex calculations.