1. What is the Loan Payment Formula?

The loan payment formula calculates the fixed monthly payment required to fully repay a loan over its term, including both principal and interest. This is the standard formula used by Banque Internationale Luxembourg and most financial institutions.

2. How Does the Calculator Work?

The calculator uses the loan payment formula:

Where:

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

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

3. Importance of Loan Calculation

Details: Understanding your monthly payment helps with budgeting and financial planning. It allows you to compare different loan options and terms.

4. Using the Calculator

Tips: Enter the principal amount in EUR, annual interest rate as a percentage, and loan term in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is included in the monthly payment?
A: The calculated payment includes both principal and interest. It does not include potential insurance, taxes, or other fees that may be part of a complete mortgage payment.

Q2: How does the loan term affect payments?
A: Longer terms result in lower monthly payments but higher total interest paid over the life of the loan.

Q3: Are the results accurate for all loan types?
A: This calculator is designed for standard fixed-rate loans. Adjustable-rate or balloon payment loans require different calculations.

Q4: How often is interest compounded?
A: The formula assumes monthly compounding, which is standard for most mortgage and personal loans.

Q5: Can I calculate payments for partial years?
A: For partial years, simply enter decimal values (e.g., 3.5 for 3 years and 6 months).