Q:

What is the formula for monthly loan payments?

A:

Quick Answer

To calculate a monthly loan payment, first determine the payment (P), the present value (PV), the rate per period (r) and the number of periods (n), according to Finance Formulas. Then enter these values into the following formula: P = r(PV) divided by 1 ? (1 + r) ? n.

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What is the formula for monthly loan payments?
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Full Answer

When using this formula, the present value of the loan is the original loan amount, Finance Formulas states. The rate per period and the number of periods must remain consistent. For instance, the rate per period is the number of months remaining on the loan if payments are made monthly.

A loan with an adjustable rate can be calculated with this same formula; however, it must be recalculated with each new rate change, Finance Formulas indicates. Graduated payment, negatively amortized, interest only, option and balloon loans are all exceptions, and lenders calculate them differently.

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