1. What is the Loan Payment Formula?

The loan payment formula calculates the fixed monthly payment required to fully repay a loan over its term, including both principal and interest. It works for both AED and USD currencies.

2. How Does the Calculator Work?

The calculator uses the loan payment formula:

Where:

• \( P \) — Principal loan amount (AED or USD)
• \( r \) — Monthly interest rate (annual rate divided by 12)
• \( n \) — Total number of payments (loan term in years × 12)
• \( PMT \) — Monthly payment amount (AED or USD)

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

3. Importance of Loan Payment Calculation

Details: Accurate payment calculation helps borrowers understand their financial commitments, compare loan offers, and budget effectively for repayments.

4. Using the Calculator

Tips: Enter the principal amount in AED or USD, the annual interest rate (as a percentage), the loan term in years, and select the currency. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between AED and USD calculations?
A: The calculation is the same for both currencies - the currency selection only affects the displayed result format.

Q2: Does this include any fees or insurance?
A: No, this calculates only the principal and interest payment. Additional fees or insurance would increase the total payment.

Q3: What if I make extra payments?
A: Extra payments reduce the principal faster, decreasing total interest paid and potentially shortening the loan term.

Q4: How does the interest rate affect payments?
A: Higher rates increase monthly payments and total interest paid over the life of the loan.

Q5: What's better - shorter term with higher payments or longer term with lower payments?
A: Shorter terms mean less total interest paid but higher monthly payments. The best choice depends on your budget and financial goals.