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 interest. It's based on the principal amount, interest rate, and loan duration.

2. How Does the Calculator Work?

The calculator uses the standard loan payment formula:

Where:

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

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

3. Importance of Loan Payment Calculation

Details: Understanding your monthly payment helps with budgeting and financial planning. It allows you to compare different loan options and determine affordability.

4. Using the Calculator

Tips: Enter the principal amount in AED, annual interest rate as a percentage (e.g., 5.25), and loan term in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Does this include any fees or insurance?
A: No, this calculates only the principal and interest payment. Additional costs like fees or insurance would increase your total monthly obligation.

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

Q3: What's the difference between fixed and variable rates?
A: This calculator assumes a fixed rate. Variable rates can change, affecting future payments.

Q4: Are there prepayment penalties?
A: Some loans charge fees for early repayment. Check your loan terms as this calculator doesn't account for prepayment.

Q5: How accurate is this calculator?
A: It provides accurate estimates for standard fixed-rate loans. Actual payments may vary slightly due to rounding or specific lender policies.