Monthly loan payment on a $40,000 loan for 84 months with a 5% interest rate

Given:
Loan Amount: $40,000
Loan Terms: 84 months = n
Interest Rate: 5% =
5/100
= 0.05 = r  (convert percent to a decimal)
Monthly Loan Payment Formula:
Monthly Loan Payment =  
Loan Amount  * 
r / 12
/ 1 – ( 1+
r/12
 ) -n

Substitute given values into Monthly Payment Formula:
Monthly Loan Payment =  
40,000  * 
0.05 / 12
/ 1 – ( 1+
0.05/12
 ) -84

Monthly Loan Payment =  $565.36  ( rounded to two decimal places)
Notes:
Total Cost =  Monthly Loan Payment * Number of Payments
Total Cost =  $565.36 * 84 =  $47,490.24
Interest Cost =  Total Cost – Loan Amount
Interest Cost =  $47,490.24 – $40,000 =  $7,490.24

The solution above and other related solutions were provided by the Monthly Loan Payment Application. 

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