Loan Payment Calculator

The Amortization Formula for Fixed-Rate Loans

A standard **installment loan** is paid off over time through regular, fixed payments. The method used to calculate these payments is known as **Amortization**. Each payment covers both a portion of the interest accrued since the last payment and a portion of the loan's principal.

Calculating the Payment:

The calculator uses the general loan payment formula, where the payment ($M$) is fixed: $$ M = P \frac{i(1+i)^n}{(1+i)^n - 1} $$ Where:

• $P$ is the **Principal** Loan Amount.
• $i$ is the **Periodic Interest Rate** ($\frac{\text{APR}}{\text{Payments Per Year}}$).
• $n$ is the **Total Number of Payments** ($\text{Loan Term in Years} \times \text{Payments Per Year}$).

Key Financial Metrics:

This tool helps determine:

• **Loan Payment:** The fixed amount you must pay each period (e.g., monthly).
• **Total Interest Paid:** The total amount of money paid solely to the lender for the privilege of borrowing the principal.
• **Total Repayment Cost:** The sum of the Principal Loan Amount and the Total Interest Paid.