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How to calculate a personal loan

Term loans use a different amortizing method than traditional amortizing loans.

  • A = Total loan amount
  • D = {[(1 + r)n] – 1} / [r(1 + r)n]
  • r (Periodic Interest Rate) = Annual rate (converted to decimal figure) divided by number of payment periods
  • n (Number of Periodic Payments) = Payments per year multiplied by number of years

For amortizing loans, using these abbreviations, the monthly payment formula is:
Loan Payment (P) = Amount (A) / Discount Factor (D)

If you have an interest-only loan, the formula is:
Loan Payment = Loan Balance x (annual interest rate/12)

Plug the numbers into an our loan calculator.

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