Loan Payment Calculator

Loan Payment Calculator

This loan payment calculator is for fixed rate loans that are fully amortizing and require monthly (principal and interest) payments. Fixed rate means that the interest rate remains the same throughout the term of the loan. Fully amortizing means that the principal balance is reduced with each monthly payment until it is zero by the end of the loan term.

Loan Payment Calculator:





Instructions:

Change the input variables above and click “Calculate” to get your result.

Loan Amount:

This is the face value, or initial amount or principal of the loan. Enter this value as a positive number.

Annual Rate:

The fixed annual interest rate charged by the lender.

Loan Term (Years):

The time period measured in years by which the principal of the loan must be repaid in full.

Monthly Loan Payment Calculator Example

Let’s say you are looking to buy a new home. The home will cost you around $300,000. So with a 20% cash down payment, you will need obtain a mortgage loan of about $240,000. Based on your credit score and financial profile, you can get a fixed 30 year loan at an annual rate of 4.5%.

How much will this loan cost you per month in principal and interest? Plug in the numbers above and you get a monthly loan payment of $1,216.04.

The inputs are as follows:

Loan Amount: $240,000

annual rate: 4.5%

number of years: 30

If the calculated amount above does not fit into your budget, you have several potential options:

  • Make a lower offer on the home which will require a smaller loan to complete the purchase. You are taking a chance the new offer will not be approved.
  • Make a larger down payment than the standard twenty percent. This will also require a smaller loan amount, but will only work if you have the money available.
  • Negotiate a lower interest rate with the bank. Or you can try and improve your credit score. However, the latter option may take some time, and generally does not happen over night. Regardless, a lower interest rate will lower your monthly payment.
  • You can consider purchasing a less expensive residence than the one you are currently considering.

Note that the same type of calculation can be performed for an auto loan or any other fixed rate fully amortizing loan.

Conclusion

Simple tools like this can be useful for quick calculations on the fly. Knowing how much a loan will cost you is key in updating your budget and making sure it will work with the added debt.

Note that the periodic payment tool can also be used as a loan payment calculator. However, unlike the loan payment calculator, the periodic payment tool has more functionality and can be used for other financial calculations as well.

 

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