1. What is the Personal Loan Payment Formula?

The Personal Loan Payment Formula calculates the fixed monthly payment required to repay a loan over a specified term, including interest. It's used by Commercial Bank and other financial institutions in Sri Lanka to determine loan repayments.

2. How Does the Calculator Work?

The calculator uses the loan payment formula:

Where:

• \( P \) — Principal loan amount (LKR)
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Number of monthly payments (loan term in months)
• \( PMT \) — Monthly payment amount (LKR)

Explanation: The formula accounts for compound interest over the loan term, calculating a fixed payment that covers both principal and interest each month.

3. Importance of Loan Calculation

Details: Understanding your monthly payment helps with budgeting and ensures you can comfortably afford the loan. It also helps compare different loan offers.

4. Using the Calculator

Tips: Enter the loan amount in LKR, annual interest rate (as offered by Commercial Bank), and loan term in months. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is the typical interest rate for personal loans in Sri Lanka?
A: Rates vary but typically range from 12% to 24% annually depending on creditworthiness and loan terms.

Q2: Are there any additional fees?
A: Commercial Bank may charge processing fees or other charges. These are not included in this calculation.

Q3: Can I pay off my loan early?
A: Most banks allow early repayment but may charge a prepayment penalty. Check with Commercial Bank for their specific policy.

Q4: 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.

Q5: Is this calculation accurate for all loan types?
A: This is standard for fixed-rate personal loans. Other products like credit cards or adjustable-rate loans use different calculations.