Formula
How it works
We use the standard amortization formula: M = P · r(1+r)^n / ((1+r)^n − 1), where r is the monthly rate and n is the number of months.
Frequently asked questions
We use the standard amortization formula: M = P × r(1+r)^n / ((1+r)^n − 1), where P is the loan amount, r is the monthly interest rate (annual ÷ 12), and n is the number of months.
The annual rate is the total yearly cost expressed as a percentage. The monthly rate is the annual rate divided by 12, and that's what plugs into the payment formula.
Shorten the term, find a lower interest rate, or put down a larger down payment. Shorter terms reduce total interest paid significantly, even if the monthly payment goes up.
No. It calculates principal and interest only. Banks may add origination fees, processing charges, or insurance on top - check your loan agreement for the full cost.
Sources
- Amortization formulas and worked examples— Consumer Financial Protection Bureau
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