1. What is Loan Amortization?

Loan amortization is the process of spreading out a loan into a series of fixed payments over time. Each payment goes toward both principal and interest, with the interest portion decreasing over time while the principal portion increases.

2. How Does the Calculator Work?

The calculator uses the standard amortization formula:

Where:

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

Explanation: The formula calculates the fixed monthly payment required to fully repay a loan over its term, accounting for compound interest.

3. Importance of Amortization Calculation

Details: Understanding your monthly payment helps with budgeting and financial planning. It also shows how much interest you'll pay over the life of the loan.

4. Using the Calculator

Tips: Enter the loan amount in AUD, annual interest rate (as a percentage), and loan term in years. The calculator will determine your monthly repayment amount.

5. Frequently Asked Questions (FAQ)

Q1: Does this calculator include Australian loan fees?
A: No, this calculates principal and interest only. Australian loans often have additional fees like establishment fees which aren't included here.

Q2: How does compounding work in Australian loans?
A: Most Australian loans compound monthly, which is what this calculator assumes.

Q3: What's a typical home loan term in Australia?
A: The most common terms are 25 or 30 years, though shorter terms are available.

Q4: Are there different types of amortization?
A: Yes, some loans use simple interest or have interest-only periods, but this calculator assumes standard principal-and-interest amortization.

Q5: How accurate is this calculator?
A: It provides a good estimate, but your actual payment may vary slightly due to rounding or specific lender policies.