1. What is the Loan Repayment Formula?

The loan repayment formula calculates the fixed monthly payment required to repay a loan over a specified term, including interest. This is the standard formula used by most banks and financial institutions for personal loans.

2. How Does the Calculator Work?

The calculator uses the loan repayment formula:

Where:

• \( PMT \) — Monthly payment amount
• \( P \) — Principal loan amount
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Total number of payments (loan term in years × 12)

Explanation: The formula accounts for compound interest over the life of the loan, ensuring each payment covers both principal and interest.

3. Importance of Loan Repayment Calculation

Details: Understanding your monthly repayment helps with budgeting and financial planning. It allows you to compare different loan options and choose the most suitable one for your financial situation.

4. Using the Calculator

Tips: Enter the loan amount in AUD, annual interest rate as a percentage (e.g., 7.5 for 7.5%), and loan term in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Does this include Bankwest's fees?
A: This calculation only includes principal and interest. Bankwest may charge additional fees which should be considered separately.

Q2: How accurate is this calculator?
A: This provides a close estimate of your repayments, but the actual amount may vary slightly based on the bank's specific rounding rules.

Q3: Can I use this for other types of loans?
A: This formula works for most fixed-rate personal loans, but may not apply to credit cards, lines of credit, or variable-rate loans.

Q4: What if I make extra repayments?
A: Extra repayments will reduce your loan term and total interest paid, but won't affect your required monthly payment amount.

Q5: How does loan term affect my repayment?
A: Shorter terms mean higher monthly payments but less total interest. Longer terms reduce monthly payments but increase total interest.