1. What is the Loan Balance Formula?

The loan balance formula calculates the remaining balance on a loan after a certain number of payments have been made. It takes into account the principal amount, interest rate, total loan term, and number of payments made.

2. How Does the Calculator Work?

The calculator uses the loan balance formula:

Where:

• \( B \) — Remaining balance
• \( P \) — Original principal amount
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Total number of payments (loan term in months)
• \( p \) — Number of payments made

Explanation: The formula calculates how much principal remains after a certain number of payments by accounting for both the interest and principal portions of each payment.

3. Importance of Loan Balance Calculation

Details: Knowing your remaining loan balance helps with financial planning, refinancing decisions, and understanding how much equity you have in your property.

4. Using the Calculator

Tips: Enter the original loan amount, monthly interest rate (as a decimal), total loan term in months, and number of payments already made. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How do I convert annual rate to monthly rate?
A: Divide the annual percentage rate (APR) by 12 and convert to decimal (e.g., 6% APR = 0.06/12 = 0.005 monthly rate).

Q2: Does this work for any type of loan?
A: This formula works for standard amortizing loans (like mortgages and car loans) with fixed rates and equal monthly payments.

Q3: Why does my balance decrease slowly at first?
A: In the early years of a loan, most of each payment goes toward interest rather than principal.

Q4: Can I use this for extra payments?
A: This formula assumes regular payments only. For loans with extra payments, a more complex calculation is needed.

Q5: How accurate is this calculator?
A: It's mathematically precise for standard loans, but always verify with your lender as actual terms may vary.