You owe $12,000 on student loans at an interest rate of 4.05% compounded monthly. You want to pay off the loan in 6 years.

What will your monthly payments be?

To calculate the monthly payments for the loan, we can use the formula for the monthly payment of a loan with compound interest:

\[
M = \frac{P \times r \times (1 + r)^n}{(1 + r)^n - 1}
\]

Where:
- $M$ = monthly payment
- $P$ = loan principal (amount borrowed) = $12,000
- $r$ = monthly interest rate = annual interest rate divided by 12 = $\frac{4.05\%}{12} = \frac{0.0405}{12}$
- $n$ = total number of payments = 6 years × 12 months = 72 months

Let's calculate it step by step.

### Step 1: Calculate the monthly interest rate
\[
r = \frac{0.0405}{12} = 0.003375
\]

### Step 2: Calculate the total number of payments
\[
n = 6 \times 12 = 72
\]

### Step 3: Use the formula to calculate the monthly payment.

I'll compute it now.Your monthly payment will be approximately **$188.02**.

Would you like more details or clarifications?

Here are 5 related questions you might find interesting:
1. How does increasing the loan term affect monthly payments?
2. What if the interest rate was compounded quarterly instead of monthly?
3. How can extra payments reduce the total interest paid over the loan term?
4. What is the total amount of interest paid over the 6-year period?
5. What happens if the loan has a variable interest rate?

**Tip:** Making extra payments early in the loan term reduces the amount of interest you pay over the life of the loan!

You owe $12,000 on student loans at an interest rate of 4.05% compounded monthly. You want to pay off the loan in 6 years. What will your monthly payments be?

Learn how to calculate monthly payments for a $12,000 student loan at an interest rate of 4.05% compounded monthly over 6 years. This guide covers compound interest and loan amortization formulas, helping you understand the step-by-step process to determine your monthly payment.

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