How to Calculate Loan Payments

Calculating Loan Payments

If you’re considering taking out a loan, it’s important to know how much your payments will be. This guide will help you calculate the regular payments you'll need to make over the lifetime of the loan.

Steps for Calculating Loan Payments

1. Determine the loan amount you require. This is the amount of money you are planning to borrow.
2. Find the interest rate. This is the annual rate of interest you will pay on the loan.
3. Determine the life of the loan. This is the length of time you will have to pay off the loan.
4. Calculate the monthly payment. To do this, use the formula: M = P [i(1 + i)^n]/[(1 + i)^n - 1], where M is the monthly payment, P is the loan amount, i is the interest rate and n is the number of payments (the number of months).
5. The final amount of your loan payment will include the amount of principal plus the interest.