Standard Payment Calculation

A standard payment calculation is a basic formula used to determine an equal payment amount and frequency in order to repay the balance of a loan. A standard loan typically has a loan amount, a specific time period in which to repay the loan and a fixed interest rate. The standard payment calculation would figure how much to repay and how often to repay it. Most loans are repaid monthly so the borrower can budget the same amount each month to repay the loan. Standard payment calculations can also be used for adjustable rate loans, but they would have to be recalculated based on remaining term and balance for each rate change. Car loans and home loans typically use a standard payment calculation to get the borrower on a equal installment plan.