# Fixed Principal Payment Loan Calculator

A fixed principal loan is a type of loan where the borrower repays a fixed amount of the principal loan amount each period, until the loan is fully paid off. The interest on the loan is calculated based on the outstanding principal balance, which decreases over time as the borrower makes principal payments.

In contrast, a traditional loan with fixed payments typically has a fixed payment amount that includes both principal and interest, so the amount of principal paid each period may vary depending on the interest rate and the remaining term of the loan.

Fixed principal loans are often used for business loans or other types of loans where the borrower expects to have a steady stream of income over time and wants to ensure that they can pay off the loan on a fixed schedule. They can also be useful for borrowers who want to reduce their total interest payments by paying off the loan faster.

### Information

### Additional instructions for the fixed principal calculator

Enter the four primary inputs:

**Loan Amount:**Enter the total amount of the loan you wish to take out. This should be entered as a positive number.**Number of Payments:**Enter the total number of payments you will make to pay off the loan. This should be entered as a positive whole number.**Annual Interest Rate:**Enter the annual interest rate for the loan, expressed as a percentage. For example, if the annual interest rate is 5%, you would enter "5" for this field.**Payment Amount:**Enter the amount of each payment you will make to pay off the loan. This should be entered as a positive number.

Note: You may enter 3 of the 4 values (Loan Amount, Number of Payments, Annual Interest Rate, Payment Amount) and leave one value as 0, and the calculator will calculate the unknown value based on the entered values.

These secondary inputs must all be set. If you are not sure about any of them, we suggest that you leave them set to their default setting.

**Payment Frequency:**Select the frequency of payments you will make to pay off the loan. This can be monthly, bi-weekly, weekly, or other intervals.**Compounding:**Select the compounding frequency of the loan. This is the frequency at which the interest is calculated and added to the loan balance. If the loan documents do not specify a compounding frequency or you don't know it, then set it to be the same as the payment frequency.**Payment Method:**Select the payment method you will use to pay off the loan. If the first payment is due when the loan originates set this option to "Advance." Otherwise, we'll assume the first payment is due one period after the origination date (when the funds are available) and in that case, this must be set to "Arrears."

A fixed principal payment loan has a declining payment amount. That is, unlike a typical loan, which has a level periodic payment amount, the principal portion of the payment is the same payment to payment, and the interest portion of the payment is less each period due to the declining principal balance. Thus the payment amount declines from one period to the next. Ultimately, the borrower will pay less in interest charges with this loan method.

This calculator will solve for any one of four possible unknowns: "Amount of Loan," "Number of Payments" (term), "Annual Interest Rate" or the "Periodic Payment."

Enter a '0' (zero) for one unknown value.

The term (duration) of the loan is a function of the "Number of Payments" and the "Payment Frequency." If the loan is calling for monthly payments and the term is four years, then enter 48 for the "Number of Payments." If the payments are made quarterly, and the term is ten years, then enter 40 for the "Number of Payments."

Normally you would set the "Payment Method" to "Arrears" for a loan. Arrears means that the monies are lent on one day, and the first payment isn't due until one period after the funds are received.

If the first payment is due on the day the funds are available, then set "Payment Method" to "Advance." This is typical for leases.

## Tamara says:

Where can I get an amortization schedule for an interest free personal loan with a fixed monthly payment?

## Karl says:

You can use this amortization calculator.

Normally, setting one of the 4 main inputs (loan amount, number of payments, interest rate or payment amount) to zero causes the calculator to solve for that input.

In your case, since there’s no interest, the interest rate is 0.0%, and you’ll not want the calculator to solve for a rate.

Therefore, look at the "amortization method" and select "No Interest".(Then you can enter zero for the interest rate.)

Hope this helps.

## Greg Brown says:

A start date would be useful. Also, for daily compounding, monthly interest would not be annual interest / 12, but either 30 or 31 days of daily interest, depending on the month (28 for Feb, of course). Thanks.

## Karl says:

For different compounding options and the ability to set dates, try this calculator.

NOTE: Set the "Amortization Method" to "Fixed Principal".

## Benard says:

How do we set the repayment date to for example 26th of every month?

## Karl says:

Use this loan calculator, and under "Amortization Method" select "Fixed Principal." This calculator allows users to set the dates.

## Ali Bensaci says:

If I borrow $16,200 by signing a 3-year, 6% note payable and the note payable is repayable in three annual fixed principal payments is my compound monthly or yearly ?

## Karl says:

It could be either or neither. The compounding depends on the term of the loan. When in doubt, though, set the compounding equal to the scheduled payment frequency.

## Ali Bensaci says:

Also, how can I calculate that with blended principal payments ?

## Karl says:

Sorry, I don’t understand this question. How do you calculate what?

## Anna says:

I curious how to calculate the fixed principle payment, how can i make the formular myself when using excel

## Karl says:

I don’t discuss formulas or equations. If I get into that, there would be no time left to work on this site (I only do this part-time). But, the fixed principal portion is the total principal divided by the number of payments. Then you add the accrued interest. It is probably the simplest of all payment calculations.

## Ed says:

In determining the annual interest payments for a 4-year Note with annual fixed principal payments and 2% annual compounding, it appears the interest payment each year is just 2% * outstanding principal. Is this correct? I was thinking it should be 2% * (outstanding principal + previous year’s interest). Thank you.

## Karl says:

Assuming that the annual payment including the interest due was paid on time, it is correct that the interest is on the outstanding balance only.

## Omar says:

Hi..

First of all, thank you for the effort you put into making those calculators.

I used the “Fixed Principal Payment Calculator” and I got results different from that when I used “Loan Calculator with options”. My goal was to use the “Loan Calculator with options” in order to use the “Extra payments” feature, but before doing so I wanted to make sure that this calculator would give the same results as the “Fixed Principal Payment Calculator”, which was not the case.

– Loan amount = RMB 1,080,000

– Number of payments = 216

– Annual Interest Rate = 5.25%

– Payment Frequency & Compounding = Monthly

– Payment Method = Arrears (Loan)

When using “Fixed Principal Payment Calculator”, I get 1st payment=RMB 9725, and the Total Interest= RMB ¥512,663.04 which are the correct numbers, but when using the “Loan Calculator with options” results are different.

Am I missing something?

Thanks for your help in advance.

## Karl says:

Hello, I get exactly the same result with both calculators, and my result matches your results. That’s assuming by loan calculator with options, you mean this calculator.

Did you change any of the dates with the loan calculator? If so, that will change the results. How do you have your interest options set? What are the dates you used, assuming the loan date and first payment date are not exactly one month apart. If the dates are not a month apart, set them so they are, then you’ll see the results match. The loan calculator is accurate enough that if you change the dates, the results change.

## Omar says:

Hello Karl, thank you for your kind reply.

your reference to the loan calculator with options is correct.

I just tried it again and it’s ok now. I think I know what my mistake was. I should have set “payment amount” to zero BEFORE pressing “calc”.

Thank you once again..

## Karl says:

Good to hear! Thanks for letting me know.