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 period, including interest. This is the standard formula used by Emirates Islamic and most financial institutions.

2. How Does the Calculator Work?

The calculator uses the Personal Loan Payment Formula:

Where:

• \( PMT \) — Monthly payment amount (AED)
• \( P \) — Principal loan amount (AED)
• \( r \) — Monthly interest rate (decimal)
• \( n \) — Number of monthly payments

Explanation: The formula calculates the fixed payment that covers both principal and interest each month, ensuring the loan is paid off in full by the end of the term.

3. Importance of Loan Payment Calculation

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

4. Using the Calculator

Tips: Enter the loan amount in AED, monthly interest rate as a decimal (e.g., 0.005 for 0.5%), and the number of monthly payments. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How do I convert annual rate to monthly rate?
A: Divide the annual rate by 12. For example, 6% annual = 0.06/12 = 0.005 monthly.

Q2: Does this include any fees or charges?
A: This calculates principal and interest only. Check with Emirates Islamic for any additional fees.

Q3: Can I use this for other types of loans?
A: Yes, this formula works for any fixed-rate, fully-amortizing loan (personal, auto, mortgage).

Q4: What if I make extra payments?
A: Extra payments reduce principal faster and shorten loan term. This calculator assumes fixed regular payments.

Q5: How accurate is this calculator?
A: It provides exact mathematical results based on the inputs. Actual loan terms may vary slightly based on bank policies.