1. What is a Loan Calculator?

Definition: This calculator estimates the monthly payment for a fixed-rate mortgage or loan based on principal amount, interest rate, and loan term.

Purpose: It helps borrowers understand their monthly obligations and compare different loan options.

2. How Does the Calculator Work?

The calculator uses the standard loan payment formula:

Where:

• \( M \) — Monthly payment (USD)
• \( P \) — Loan principal (USD)
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Number of payments (loan term in years × 12)

Explanation: The formula calculates the fixed payment amount required to pay off the loan over its term, including both principal and interest.

3. Importance of Loan Payment Calculation

Details: Accurate payment estimation helps with budgeting, loan comparison, and determining affordability before committing to a loan.

4. Using the Calculator

Tips: Enter the loan amount, annual interest rate (without % sign), 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 a complete mortgage payment estimate, add property taxes and insurance.

Q2: 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.

Q3: How does loan term affect payments?
A: Shorter terms mean higher monthly payments but less total interest paid over the life of the loan.

Q4: What about adjustable-rate mortgages (ARMs)?
A: This calculator is for fixed-rate loans only. ARM payments can change after the initial fixed period.

Q5: How accurate is this calculator?
A: It provides standard payment estimates, but actual loan terms may vary based on credit score, lender fees, and other factors.