How to Calculate Loan Payments
The formula for calculating a fixed-rate loan payment is commonly known as the amortization formula. It determines the correct monthly payment so that at the end of the loan term, the balance is exactly zero.
Understanding your monthly payment helps you budget effectively, whether you are buying a home, a car, or taking out a personal loan. Adjusting the loan term can significantly change both your monthly payment and the total interest paid over the life of the loan.