Question 1

How is a monthly loan payment calculated?

Accepted Answer

Monthly payment = P × [r(1+r)^n] / [(1+r)^n − 1], where P is the principal, r is the monthly interest rate (annual rate ÷ 12), and n is the total number of monthly payments.

Question 2

What is an amortization schedule?

Accepted Answer

An amortization schedule shows how each payment is split between principal and interest over the life of the loan. Early payments are mostly interest; later payments are mostly principal.

Question 3

Does a higher down payment reduce interest?

Accepted Answer

Yes. A larger down payment reduces the loan principal, which lowers both your monthly payment and the total interest paid over the life of the loan.

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