UNDERSTAND THE ANSWERHow is this calculated?
This standard amortization formula spreads principal and interest across equal monthly payments. It assumes a fixed rate and no additional fees.
Fixed-payment loan formulaPayment = P × [r(1 + r)ⁿ] ÷ [(1 + r)ⁿ − 1]
A practical example
A $25,000 loan at 7.5% for five years costs about $501 per month and approximately $5,000 in total interest.