Monthly payment uses the amortization formula: M = P[r(1+r)^n] / [(1+r)^n - 1], where P is principal, r is monthly rate, and n is total months. For a $25,000 loan at 8% for 5 years: M = 25000[0.00667(1.00667)^60] / [(1.00667)^60 - 1] = $506.91/month.
- P = loan principal (amount borrowed minus down payment)
- r = annual rate / 12 (monthly interest rate)
- n = loan term in years x 12 (total payments)
- Higher rate or shorter term = higher monthly payment
- Total interest = (monthly payment x months) - principal