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I have been using the given formula to figure out if I got a loan of $7,000 at 7% annual interest, how much more is the monthly payment for a 12-month term than for an 18-month term? 

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I believe this formula is probably a bit easier to use, taken from reference.

compound interest

where:

  • P = monthly payment
  • L = principal
  • i = monthly interest rate
  • n = number of payment periods

so you run this once with L = 7000, i = 0.07/12, n = 12, then run again with n = 18

For 12 months the monthly payment is: $605.69 for 18 months the monthly payment is: $410.79

so the monthly difference in payment amounts = $194.90

Of course, you could have also done a google search for "car loan calculator" and the top hit will get also you what you need. Our friends at Google have provided a functional calculator right at the top of the search results.

edit:

As I look at your formula closely, I think its correct. The only 'trick' is understanding that interest rate, expressed as percent (7%), gets written as 0.07, and the monthly interest rate is the annual rate / 12 (as in 12 months per year).

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