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 principal and interest. This is particularly useful for Nepalese bank loans where interest rates vary.

2. How Does the Calculator Work?

The calculator uses the standard loan payment formula:

Where:

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

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: Understanding your monthly payment helps with financial planning and comparing different loan options from Nepalese banks. It shows the true cost of borrowing.

4. Using the Calculator

Tips: Enter the principal amount in NPR, annual interest rate (common rates in Nepal range from 8-15%), and loan term in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is a typical interest rate in Nepalese banks?
A: Rates vary by bank and loan type but typically range from 8% to 15% annually for personal and home loans.

Q2: Does this include any processing fees?
A: No, this calculates principal and interest only. Nepalese banks may charge additional processing fees (typically 0.5-1% of loan amount).

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

Q4: Can I prepay my loan in Nepal?
A: Most Nepalese banks allow prepayment, often with a prepayment penalty (usually 1-2% of outstanding amount).

Q5: How often do rates change in Nepal?
A: Fixed rates remain constant, while variable rates may change quarterly based on Nepal Rastra Bank's monetary policy.