Calculating your monthly loan payment is crucial for budgeting and understanding the true cost of borrowing money. Whether it's for a car, a house, or a personal loan, knowing this figure helps you make informed financial decisions. The standard formula used for calculating the monthly payment of an amortizing loan is based on the loan amount, interest rate, and loan term.
The formula commonly used is the annuity formula:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
Where:
M = Your total monthly mortgage payment
P = The principal loan amount (the amount you borrow)
i = Your monthly interest rate (your annual interest rate divided by 12)
n = The total number of payments over the loan's lifetime (the number of years you have to repay the loan multiplied by 12)
How the Calculator Works:
Our calculator takes the values you provide for:
Loan Amount (P): The total sum of money you are borrowing.
Annual Interest Rate: The yearly rate charged by the lender. This is converted to a monthly rate by dividing by 12.
Loan Term (Years): The total duration of the loan. This is converted to the total number of monthly payments by multiplying by 12.
It then plugs these values into the formula described above to compute your fixed monthly payment (M).
Example Calculation:
Let's say you want to take out a loan with the following terms:
Loan Amount (P): $20,000
Annual Interest Rate: 6%
Loan Term: 3 Years
First, we need to calculate the monthly interest rate (i) and the total number of payments (n):
So, the estimated monthly payment for a $20,000 loan at 6% interest over 3 years is approximately $608.44.
Use Cases:
This calculator is useful for:
Estimating monthly payments for car loans.
Forecasting payments for personal loans.
Getting an idea of affordability for business loans.
Comparing different loan offers from various lenders.
Remember that this calculation typically excludes additional fees, insurance, or taxes that might be bundled into your actual loan payment. Always review your loan agreement for a precise breakdown.
function calculateLoanPayment() {
var principal = parseFloat(document.getElementById("loanAmount").value);
var annualRate = parseFloat(document.getElementById("annualInterestRate").value);
var years = parseFloat(document.getElementById("loanTermYears").value);
var monthlyRate = annualRate / 100 / 12;
var numberOfPayments = years * 12;
var monthlyPayment = 0;
if (principal > 0 && annualRate >= 0 && years > 0) {
if (monthlyRate === 0) { // Handle zero interest rate case
monthlyPayment = principal / numberOfPayments;
} else {
monthlyPayment = principal * (monthlyRate * Math.pow(1 + monthlyRate, numberOfPayments)) / (Math.pow(1 + monthlyRate, numberOfPayments) – 1);
}
}
var formattedMonthlyPayment = monthlyPayment.toFixed(2);
if (isNaN(formattedMonthlyPayment) || formattedMonthlyPayment === "NaN") {
formattedMonthlyPayment = "Invalid input";
document.getElementById("result").innerHTML = 'Monthly Payment: ' + formattedMonthlyPayment + '';
} else {
document.getElementById("result").innerHTML = 'Monthly Payment: $' + formattedMonthlyPayment + '';
}
}