1. What is Loan Balance Calculation?

The loan balance calculation determines the remaining amount owed on a loan after a certain number of payments. It accounts for both the principal amount and the accrued interest.

2. How Does the Calculator Work?

The calculator uses the loan balance equation:

Where:

• \( P \) — Principal loan amount (USD)
• \( r \) — Interest rate per period (decimal)
• \( n \) — Number of periods elapsed
• \( PMT \) — Payment amount per period (USD)

Explanation: The equation calculates the compounded loan amount and subtracts the accumulated value of all payments made.

3. Importance of Loan Balance Calculation

Details: Knowing your loan balance helps in financial planning, refinancing decisions, and understanding how much principal remains to be paid.

4. Using the Calculator

Tips: Enter principal in USD, interest rate as decimal (e.g., 0.05 for 5%), number of periods, and payment amount in USD. All values must be positive.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between loan balance and payoff amount?
A: The payoff amount may include additional fees or accrued interest not yet due, while the balance is the principal plus only the accrued interest.

Q2: How often should I calculate my loan balance?
A: It's useful to calculate whenever considering refinancing, making extra payments, or assessing your financial situation.

Q3: Why does my balance decrease slower at first?
A: In amortizing loans, early payments consist mostly of interest, with more principal being paid later in the loan term.

Q4: How do extra payments affect the balance?
A: Extra payments reduce principal faster, decreasing total interest paid and potentially shortening the loan term.

Q5: Can this be used for any type of loan?
A: This works for standard amortizing loans. Interest-only loans or credit cards would require different calculations.