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Loan Payment Formula:
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The Monthly Payment Calculator helps you determine your fixed monthly payment 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 standard loan payment formula:
Where:
Explanation: This formula calculates the fixed monthly payment required to fully amortize a loan over its term, accounting for both principal and interest.
Details: Knowing your exact monthly payment helps with budgeting, comparing loan offers, understanding total borrowing costs, and making informed financial decisions about mortgages, car loans, and personal loans.
Tips: Enter the principal amount in dollars, annual interest rate as a percentage (e.g., 5.25 for 5.25%), and loan term in years. All values must be positive numbers.
Q1: What types of loans can this calculator be used for?
A: This calculator works for any fixed-rate amortizing loan including mortgages, auto loans, personal loans, and student loans with fixed monthly payments.
Q2: Does this include taxes and insurance in the payment?
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 the interest rate affect my monthly payment?
A: Higher interest rates significantly increase monthly payments. A 1% rate increase can raise your payment by 5-10% depending on the loan term.
Q4: What's the difference between a 15-year and 30-year mortgage?
A: A 15-year mortgage has higher monthly payments but much less total interest paid. A 30-year mortgage has lower monthly payments but significantly more total interest over the life of the loan.
Q5: Can I calculate payments for loans with different compounding periods?
A: This calculator assumes monthly compounding, which is standard for most consumer loans. For other compounding periods, the formula would need adjustment.