1. What is the Car Loan Payment Formula?

The car loan payment formula calculates the fixed monthly payment required to repay a car loan over a specified term. It takes into account the principal amount, annual interest rate, and loan duration.

2. How Does the Calculator Work?

The calculator uses the standard loan payment formula:

Where:

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

Explanation: The formula accounts for both principal repayment and interest charges, distributing payments evenly over the loan term.

3. Importance of Loan Calculation

Details: Understanding your monthly payment helps with budgeting and comparing different loan offers. It also shows the total cost of borrowing.

4. Using the Calculator

Tips: Enter the loan amount in AED, annual interest rate (without % sign), and loan term in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is a typical car loan interest rate in UAE?
A: Rates vary but typically range from 2.5% to 5% for new cars and 5% to 10% for used cars, depending on credit history.

Q2: How does loan term affect payments?
A: Longer terms reduce monthly payments but increase total interest paid. Shorter terms have higher payments but lower total cost.

Q3: Are there other costs besides the monthly payment?
A: Yes, consider down payment, processing fees, insurance, and registration costs when budgeting for a car.

Q4: Can I pay off my loan early?
A: Most UAE banks allow early repayment but may charge a penalty (usually 1% of outstanding amount).

Q5: What's better - bank financing or dealership financing?
A: Bank loans often have lower rates but require more paperwork. Dealership financing is convenient but may have higher rates.