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. This calculation is used by Heritage Bank and other financial institutions to determine loan repayments.

2. How Does the Calculator Work?

The calculator uses the standard loan payment formula:

Where:

• \( P \) — Principal loan amount (AUD)
• \( r \) — Monthly interest rate (annual rate ÷ 12 ÷ 100)
• \( n \) — Total number of payments (months)
• \( PMT \) — Monthly payment amount (AUD)

Explanation: The formula calculates the fixed payment that covers both principal and interest over the loan term.

3. Importance of Loan Payment Calculation

Details: Understanding your monthly payment helps with budgeting and ensures you can comfortably afford the loan before committing.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

Q1: Does this include Heritage Bank's fees?
A: This calculation only includes principal and interest. Heritage Bank may charge additional fees that aren't reflected here.

Q2: How does the interest rate affect payments?
A: Higher rates increase monthly payments. A 1% rate increase can significantly impact your payment amount.

Q3: What's better - shorter or longer loan term?
A: Shorter terms mean higher payments but less total interest. Longer terms reduce monthly payments but increase total interest paid.

Q4: Can I make extra payments?
A: Heritage Bank may allow extra payments which can reduce total interest and shorten the loan term.

Q5: Are rates fixed or variable?
A: Heritage Bank offers both fixed and variable rate personal loans. This calculator assumes a fixed rate.