Debt Repayment Calculator

Debt repayment is an essential aspect of financial planning, helping individuals and businesses manage liabilities while avoiding financial strain. Our Debt Repayment Calculator simplifies the process by providing quick and accurate insights into your repayment details. Whether you're managing a personal loan, mortgage, or any other debt, this tool is designed to offer clarity and help you make informed financial decisions.

• What Is Debt Repayment?
• Debt Repayment Formula
• How to Calculate Debt Repayment

What Is Debt Repayment?

Debt repayment refers to the process of paying back borrowed money, typically through regular installments over a set period. Each payment consists of two parts:

• Principal: The original amount borrowed.
• Interest: The cost of borrowing, calculated as a percentage of the principal.

The goal of debt repayment is to reduce the principal while covering the interest, ultimately eliminating the debt.

Debt Repayment Formula

The most common method to calculate debt repayment involves determining the monthly payment required to pay off the loan over a specific period. The formula is:

M = P \times \dfrac{r(1+r)^n}{(1+r)^n - 1}

• M: Monthly payment
• P: Loan amount (principal)
• r: Monthly interest rate (Annual Interest Rate ÷ 12)
• n: Total number of payments (Loan Term in months)

Example:

• Loan Amount: $200,000
• Annual Interest Rate: 6% (r = 6/12 = 0.005)
• Loan Term: 60 months (n)

Substitute into the formula:

M = 200000 \times \dfrac{0.005(1+0.005)^60}{(1+0.005)^60 - 1}

After calculations:

• Monthly Payment: $3,866.76
• Total Payment: $231,995.6
• Total Interest: $31,995.6

How to Calculate Debt Repayment

To calculate your repayment manually, follow these steps:

• Determine the monthly interest rate: Divide the annual interest rate by 12.
• Calculate the total number of payments: Multiply the number of years by 12 (for monthly payments).
• Apply the formula: Use the formula above to find your monthly payment.
• Compute total payment and interest: Total Payment = Monthly Payment × Total Payments, Total Interest = Total Payment - Loan Amount

While manual calculations are useful for understanding the process, our calculator streamlines the process, providing accurate results in seconds.

How to Use the Debt Repayment Calculator

Our calculator is designed to be user-friendly. Here’s how to use it:

• Input Loan Amount: Enter the total amount borrowed.
• Input Annual Interest Rate: Specify the interest rate as a percentage.
• Enter Loan Term: Provide the loan duration in months.

The calculator will instantly compute:

• Monthly Payment
• Total Payment (Principal + Interest)
• Total Interest Paid

The results are displayed clearly, helping you understand your repayment plan.