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Ordinary Annuity Payment Formula:
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The Ordinary Annuity Payment formula calculates the periodic payment amount required to pay off a loan or achieve a future value over a specified number of periods at a given interest rate. It's commonly used for mortgage calculations, car loans, and retirement planning.
The calculator uses the Ordinary Annuity Payment formula:
Where:
Explanation: The formula calculates the fixed payment amount required to fully amortize a loan over the specified number of periods at the given interest rate.
Details: Accurate payment calculation is crucial for financial planning, budgeting, loan comparisons, and ensuring borrowers can afford their debt obligations.
Tips: Enter the present value (loan amount), interest rate as a percentage, and number of payment periods. All values must be positive numbers.
Q1: What's the difference between ordinary annuity and annuity due?
A: Ordinary annuity payments are made at the end of each period, while annuity due payments are made at the beginning of each period.
Q2: How does interest rate affect the payment amount?
A: Higher interest rates result in higher payment amounts, as more money goes toward interest rather than principal.
Q3: What happens if I make extra payments?
A: Extra payments reduce the principal balance faster, potentially shortening the loan term and reducing total interest paid.
Q4: Are there limitations to this calculation?
A: This assumes fixed interest rates and equal payment amounts throughout the loan term. It doesn't account for variable rates, fees, or payment changes.
Q5: Can this be used for investment calculations?
A: Yes, the same formula can be used to calculate regular investment contributions needed to reach a future savings goal.