1. What is the Loan Payment Formula?

The loan payment formula calculates the fixed monthly payment required to repay a loan over a specified term, including both principal and interest. This is the standard formula used by UK lenders for fixed-rate loans.

2. How Does the Calculator Work?

The calculator uses the loan payment formula:

Where:

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

Explanation: The formula accounts for compound interest over the life of the loan, calculating a fixed payment that pays off both principal and interest by the end of the term.

3. Understanding Loan Payments

Details: In the UK, most personal loans use this fixed payment structure. Early payments consist mostly of interest, with more going toward principal as the loan matures.

4. Using the Calculator

Tips: Enter the loan amount in GBP, the annual interest rate (APR), and the loan term in years. The calculator will show your estimated monthly repayment.

5. Frequently Asked Questions (FAQ)

Q1: Does this include fees?
A: This calculates principal and interest only. Some UK loans may have additional fees not included here.

Q2: What's a typical UK loan interest rate?
A: Rates vary by creditworthiness, but typically range from 3% to 30% APR for personal loans.

Q3: Can I pay off my loan early?
A: Most UK lenders allow early repayment but may charge an early settlement fee (typically 1-2 months' interest).

Q4: How does loan term affect payments?
A: Longer terms mean lower monthly payments but more total interest paid over the life of the loan.

Q5: Is this calculator accurate for mortgages?
A: The formula is similar, but mortgages often have different fee structures and may be affected by changing interest rates.