Loan/Amortization Calculator

How to Calculate a Loan Payment

The monthly payment on a loan is calculated using the fixed payment (PMT) formula, which considers the loan amount, monthly interest rate, and total number of payments. This formula ensures every payment is identical throughout the life of the loan.

Monthly Payment Formula

Payment = P x [r(1+r)^n] / [(1+r)^n - 1], where P is the loan principal, r is the monthly interest rate (annual rate / 12), and n is the total number of monthly payments.

Frequently Asked Questions

What is an amortization schedule?

An amortization schedule shows the breakdown of each monthly payment into principal and interest, along with the remaining balance. At the beginning of the loan, most of the payment goes toward interest; as time progresses, more goes toward principal.

How can I reduce total interest paid?

You can reduce interest by choosing a shorter loan term, making extra payments toward the principal, or negotiating a lower interest rate.