1. What is a Personal Promissory Note?

A personal promissory note is a legal document that outlines the terms of a loan between individuals. It specifies the principal amount, interest rate, repayment schedule, and other terms agreed upon by the lender and borrower.

2. How Does the Calculator Work?

The calculator uses the standard loan payment formula:

Where:

• \( P \) — Principal loan amount (USD)
• \( r \) — Interest rate per period (decimal)
• \( n \) — Total number of payment periods

Explanation: This formula calculates the fixed periodic payment required to pay off a loan with interest over a specified number of periods.

3. Importance of Accurate Payment Calculation

Details: Accurate payment calculation ensures both parties understand the repayment obligations and helps prevent disputes. It's essential for financial planning and legal documentation.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between annual and periodic rate?
A: If payments are monthly, divide the annual rate by 12. For quarterly payments, divide by 4. The calculator uses the periodic rate corresponding to your payment frequency.

Q2: How does payment frequency affect the calculation?
A: More frequent payments (e.g., monthly vs. annually) result in lower interest costs over the life of the loan.

Q3: Can this be used for amortization schedules?
A: Yes, this payment amount can be used as the basis for creating a full amortization schedule.

Q4: What about loans with balloon payments?
A: This calculator assumes fully amortizing loans. For balloon payments, additional calculations are needed.

Q5: Is this valid for all types of loans?
A: This formula works for standard installment loans with fixed rates. Adjustable-rate loans or interest-only loans require different calculations.