
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.