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Promissory Note Installment Formula:
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The promissory note installment formula calculates the periodic payment amount for a loan with fixed payments and a fixed interest rate. It's commonly used for mortgages, car loans, and other installment loans.
The calculator uses the installment payment formula:
Where:
Explanation: The formula accounts for both principal repayment and interest charges over the life of the loan, calculating a fixed payment amount that remains the same throughout the repayment period.
Details: Accurate payment calculation is crucial for financial planning, budgeting, and understanding the true cost of borrowing. It helps borrowers compare different loan options and understand their repayment obligations.
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.
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 on a 12% annual rate, use 0.01 (12%/12).
Q2: Does this work for credit card payments?
A: This formula assumes fixed payments. Credit cards typically have minimum payments that vary, so this formula isn't directly applicable.
Q3: How does extra principal payment affect the calculation?
A: Extra payments reduce principal faster, potentially shortening the loan term. This calculator assumes no extra payments.
Q4: What if my interest rate changes?
A: This formula assumes a fixed rate. For variable rate loans, you'd need to recalculate when rates change.
Q5: Can I use this for bi-weekly payments?
A: Yes, but you must use the bi-weekly interest rate (annual rate/26) and bi-weekly payment count.