What is a 'Fixed-Rate Payment'

A fixed-rate payment is the amount due every period by a borrower to a lender under a fixed-rate loan. The fixed-rate loan payments will be equal amounts until the loan plus interest are paid in full. The payment amount can be calculated using the following formula:

Fixed-Rate Payment



Where:
P is the constant payment you make every period
R is the interest rate per period
N is the number of periods
Loan is the total loan amount

BREAKING DOWN 'Fixed-Rate Payment'

To calculate R, take the yearly interest rate and divide by the number of payment periods in a year. For example, if you pay monthly and your yearly interest is 5%, then your interest per period will be (0.05/12) = 0.004167 or 0.4167%.

To calculate N, take the duration of the loan in years and multiply it by the periods in a year. For example, if you have a 25-year loan that you pay monthly, the total periods will be 12 X 25 = 300.

Borrowers usually have the option of either a fixed-rate loan or a floating-rate loan. Some loans can even be interest-only, under which there are no required principal repayments.

RELATED TERMS
  1. Term Loan

    A loan from a bank for a specific amount that has a specified ...
  2. Loan Constant

    An interest factor used to calculate the debt service of a loan. ...
  3. Amortized Loan

    A loan with scheduled periodic payments of both principal and ...
  4. Standing Loan

    A type of loan where payments are made of interest only. Repayment ...
  5. Renegotiated Loan

    The result of an agreement between a borrower and a lender to ...
  6. Amortization Schedule

    A complete schedule of periodic blended loan payments, showing ...
Related Articles
  1. Personal Finance

    Mortgages: Fixed-Rate Versus Adjustable-Rate

    Both of these have advantages and disadvantages depending on your financial needs and prospects.
  2. Investing

    Try This Home-Equity-Line-of-Credit Hybrid

    This product is essentially a home-equity loan and home equity line of credit (HELOC) hybrid, and it has its own quirks, benefits and drawbacks.
  3. Personal Finance

    Understanding Term Loans

    A loan from a bank for a specific amount that has a specified repayment schedule and a floating interest rate.
  4. Personal Finance

    Student Loan Debt: Is Consolidation The Answer?

    Consolidating your student loans offers convenience, but there are drawbacks.
  5. Personal Finance

    Simple Interest Loans: Do They Exist?

    Yes, they do. Here is what they are – and how to use them to your advantage.
  6. Personal Finance

    10 Tips to Topple Student Loan Debt

    How to manage those burdensome payments as you embark on adult life.
  7. Personal Finance

    Would You Save with an Interest-Only Mortgage?

    Sophisticated borrowers might want to consider one of these loans to keep their initial payments low, but they need to fully understand the risks.
  8. Personal Finance

    How Interest Rates Work On A Mortgage

    A step-by-step explanation of the interest calculations, mortgage types, and how the loan is eventually "retired" – which means paid off.
RELATED FAQS
  1. Which is better, a fixed or variable rate loan?

    A variable interest rate loan is a loan in which the interest rate charged on the outstanding balance varies as market interest ... Read Answer >>
  2. What are the pros and cons of life insurance policy loans?

    Find out the pros and cons of borrowing against your life insurance policy to help you decide if this loan type is the right ... Read Answer >>
  3. How does debt consolidation lower my monthly payments?

    Find out how combining your debts into a single debt consolidation loan might actually lower the total amount you have to ... Read Answer >>
  4. What are the pros and cons of consolidating my student loans?

    Read about the possible advantages and disadvantages of consolidating your student loan debts, and find out how to determine ... Read Answer >>
  5. Are secured personal loans better than unsecured loans?

    Read about the differences between secured loans and unsecured loans and how they are used. Learn about forms of collateral ... Read Answer >>
Hot Definitions
  1. Graduate Record Examination - GRE

    A standardized exam used to measure one's aptitude for abstract thinking in the areas of analytical writing, mathematics ...
  2. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  3. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
  4. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  5. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  6. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
Trading Center