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That’s a very detailed breakdown of how a loan payment calculator works! It provides the formula, an example, and information on the benefits of making extra payments.

Based on the provided text, here is a summary of the key information and the loan payment calculation formula:

Key Information from the Loan Payment Calculator Guide

• What it is: A financial tool that estimates your regular loan payments.
• Required Inputs:
  • Principal (loan amount)
  • Annual Interest Rate
  • Loan Term (length in months or years)
• The Power of Extra Payments: Making additional payments (even small, recurring ones) drastically reduces the total interest paid and shortens the loan term.
• Amortization: This is the schedule that breaks down each monthly payment into its principal and interest portions over the life of the loan.

loan Payment Formula

The standard formula for calculating the monthly payment (M) on an amortizing loan is:

M=P×(1+r)n−1r(1+r)n​

Variable Definitions

Variable	Description
M	Monthly payment
P	Principal loan amount
r	Monthly interest rate (calculated as: Annual Rate ÷12)
n	Total number of monthly payments (calculated as: Loan Term in Years ×12)

Example

The text provides this example: Borrow $20,000 at 6% interest for 5 years (60 months).

• P=20000
• r=0.06÷12=0.005
• n=5×12=60

Plugging the numbers into the formula yields:

M=20000×(1.005)60−10.005(1.005)60​=$386.66