If you’re considering applying for some sort of loan, then it may be helpful to first know what the payment amounts with interest might be. Not only will calculating loan repayments give you the confidence in your ability to make your payments, but you will also be able to gain trust with your lender by showing her your research.

Easily Calculate Loan Repayment Amounts

There are several ways to calculate a loan repayment. Whichever method you choose, you must first understand the variables that are involved in loan repayment calculation and their symbols.

Some methods will ask for the symbols while others will spell out exactly what they are asking for. Referring to the descriptions below can make the process go a little more smoothly.

  • M is the Payment Amount
  • P is the Principal, or the Amount of Money Borrowed
  • J is the Effective Interest Rate
    • To calculate the Effective Interest Rate, follow these steps:
      • Divide the annual interest rate by 100 in order to get it into a decimal form.
      • Then, divide the decimal form by the number of payments that will be made.
  • N is the Total Number of Payments

Now that you are familiar with the common variables involved in calculating loan payment amounts you will be able to more easily understand how to arrive at a solution.

How to Calculate Loan Payments With a Formula

If you would like to calculate your loan payments manually, then you can use the loan payments formula:

M = P * (J/1 – (1 + J) – N))

In order to solve this formula, you need all of the necessary information. It is also essential to use a graphing calculator because a standard calculator opens you up to the risk of significant rounding errors.

Though just looking at the formula can be intimidating, it can be completed by taking it one step at a time. However, if math is not your strongest asset, then consider one of the two following options.  

How to Calculate Loan Payments Using Online Calculators

Performing a simple Google search for online loan payment calculators brings up hundreds of results. Some of the advanced ones require users to set up an account, and others are just not user friendly. In order to save you some time, we’ve rounded up several of the best loan repayment calculators.

Using any of these online loan payment calculators is a quick and easy way to determine your payment amounts.

How to Calculate Loan Payments in Excel

One of the most popular methods for calculating loan repayment amounts is the use of Excel. Not only is it easy to input information, but you’ll be able to save the document for reference later. It only takes a few steps to calculate a loan repayment in Excel and they are best explained in this video.

If you don’t have Excel, then don’t worry. Google Sheets works very similarly to Excel. The application is free, but you must register for a Google account in order to use it.

Repaying loans on time is extremely important. Whether you’re interested in a payday loan, student loans, or a car title loan, calculating loan repayment amounts is a great first step toward financial responsibility.

Calculating your loan repayments by hand, through an online loan repayment calculator, or by plugging in all your information into Excel or Google Sheets is a great way to get a realistic idea of your payments. When you have that down, the path to debt-free living is much easier to follow.