Home
Back
Promissory Note Loan Formula:
| From: | To: |
A promissory note loan is a financial instrument that contains a written promise by one party (the issuer or maker) to pay another party (the payee) a definite sum of money, either on demand or at a specified future date. This calculator helps determine the periodic payment amount.
The calculator uses the standard loan payment formula:
Where:
Explanation: The formula calculates the fixed periodic payment required to fully amortize a loan over its term, including both principal and interest components.
Details: Accurate payment calculation is crucial for both lenders and borrowers to understand repayment obligations, create amortization schedules, and ensure loan terms are properly documented.
Tips: Enter the loan amount in USD, interest rate per period as a decimal (e.g., 0.05 for 5%), and the total number of payment periods. All values must be positive numbers.
Q1: What's the difference between annual rate and periodic rate?
A: The periodic rate is the annual rate divided by the number of periods per year. For monthly payments, divide the annual rate by 12.
Q2: Can this be used for mortgages or car loans?
A: Yes, this formula is the standard calculation for most installment loans including mortgages, car loans, and personal loans.
Q3: How does payment frequency affect the calculation?
A: More frequent payments (e.g., monthly vs. annually) require adjusting both the rate (divide by periods/year) and number of periods (multiply by years).
Q4: What if I want to calculate total interest paid?
A: Multiply the payment amount by total periods, then subtract the original loan amount.
Q5: Are there different types of promissory notes?
A: Yes, including simple interest notes, amortizing notes, and balloon payment notes. This calculator handles standard amortizing notes.