1. What is the Loan Repayment Formula?

The loan repayment 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 Australian lenders for personal loans.

2. How Does the Calculator Work?

The calculator uses the loan repayment formula:

Where:

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

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

3. Importance of Loan Repayment Calculation

Details: Understanding your loan repayments helps with budgeting, comparing loan offers, and assessing affordability before committing to a loan.

4. Using the Calculator

Tips: Enter the loan amount in AUD, annual interest rate (without % sign), and loan term in years. The calculator will show your monthly payment, total repayment amount, and total interest paid.

5. Frequently Asked Questions (FAQ)

Q1: Are Australian personal loans typically calculated this way?
A: Yes, most Australian lenders use this standard formula for fixed-rate personal loans.

Q2: Does this include loan fees?
A: No, this calculation doesn't include any upfront or ongoing fees. Check with your lender for the full cost.

Q3: How accurate is this calculator?
A: It provides accurate estimates for fixed-rate loans. Variable rate loans may differ as rates change.

Q4: Can I use this for other types of loans?
A: While the formula is similar, car loans and mortgages may have different fee structures.

Q5: How can I reduce my total interest paid?
A: Making extra repayments or choosing a shorter loan term will reduce total interest.