1. What is the Personal Loan Payment Formula?

The personal loan payment formula calculates the fixed monthly payment required to repay a loan over a specified term. It accounts for the principal amount, annual interest rate, and loan duration to determine the monthly payment amount.

2. How Does the Calculator Work?

The calculator uses the standard loan payment formula:

Where:

• \( Principal \) — Original loan amount
• \( r \) — Monthly interest rate (APR/12)
• \( n \) — Total number of payments (loan term in months)

Explanation: The formula accounts for compound interest over the life of the loan, spreading payments evenly across the term.

3. Importance of Loan Payment Calculation

Details: Knowing your exact monthly payment helps with budgeting and financial planning. It allows you to compare loan offers and understand the total cost of borrowing.

4. Using the Calculator

Tips: Enter the loan amount in dollars, annual percentage rate (APR), and loan term in months. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between APR and interest rate?
A: APR includes both the interest rate and any additional fees, giving a more complete picture of the loan's cost.

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 cost.

Q3: Are there different types of personal loans?
A: Yes, including secured/unsecured, fixed/variable rate, and installment/revolving loans. This calculator works best for fixed-rate installment loans.

Q4: What's amortization?
A: The process of paying off debt through regular payments that cover both principal and interest over time.

Q5: Can I pay off my loan early?
A: Most lenders allow early payoff, but some charge prepayment penalties. Check your loan agreement for details.