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 principal and interest. It's essential for financial planning and loan comparisons in Kenya Shillings.

2. How Does the Calculator Work?

The calculator uses the standard loan payment formula:

Where:

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

Explanation: The formula accounts for compound interest over the loan term, calculating a fixed payment that covers both principal and interest each month.

3. Importance of Loan Calculation

Details: Accurate loan calculations help borrowers understand their repayment obligations, compare loan offers, and plan their finances effectively in Kenya Shillings.

4. Using the Calculator

Tips: Enter the principal amount in KES, annual interest rate as a percentage, and loan term in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's included in the monthly payment?
A: The payment includes both principal and interest. It doesn't include insurance, taxes, or other fees that may be part of a complete loan package.

Q2: How does loan term affect payments?
A: Longer terms reduce monthly payments but increase total interest paid. Shorter terms have higher monthly payments but lower total interest.

Q3: Are Kenyan loan rates typically fixed or variable?
A: Both exist. This calculator assumes a fixed interest rate throughout the loan term.

Q4: What's a typical loan term in Kenya?
A: Personal loans often have 1-7 year terms, while mortgages may extend to 20-25 years.

Q5: How accurate is this calculator?
A: It provides accurate estimates for standard amortizing loans. Actual loan terms may include additional fees or conditions.