Loan payments and effective cost

A payment answers how much is due each month; effective cost also reflects net proceeds, payments and timing.

Equal month-end payments

The present-value annuity formula uses principal, monthly rate and payment count. It assumes a fixed rate and equal payments at each month end; at zero interest, payment is principal divided by periods. OpenStax Loan Amortization provides the formula and a 32,000-unit, 6%, 36-month example producing about 973.50 per payment.

Fees can raise the cost

If net proceeds are less than principal while payments remain based on the full principal, the periodic rate equating those cash flows rises. The tool compounds that periodic rate to an annual figure.

When this model does not fit

Use the actual dated cash-flow schedule for floating rates, irregular dates or payments, balloon payments, insurance, or omitted charges. The Bank of Thailand discusses disclosing assumptions and actual charges in its interest and fee disclosure rules, attachment 5. That document does not certify this simplified result for every product.

Calculate equal payments · Estimate annual cost from cash flows

Content and sources checked 11 September 2026