1. What is the Loan Payment Formula?

The loan payment formula calculates the fixed monthly payment required to fully repay a loan with interest over a specified term. It accounts for 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 (PHP)
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Total number of payments (loan term in years × 12)
• \( PMT \) — Monthly payment amount (PHP)

Explanation: The formula calculates the fixed payment that covers both principal and interest each month, resulting in the loan being paid off exactly at the end of the term.

3. Importance of Loan Calculation

Details: Understanding your monthly payment helps with budgeting and financial planning. It shows the true cost of borrowing by including interest charges.

4. Using the Calculator

Tips: Enter the principal amount in PHP, annual interest rate as a percentage (e.g., 5 for 5%), and loan term in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why does my payment include so much interest at first?
A: Loan payments are front-loaded with interest because early payments cover interest on the full principal balance.

Q2: How can I reduce my total interest paid?
A: You can reduce total interest by choosing a shorter loan term or making additional principal payments.

Q3: What's the difference between fixed and variable rate loans?
A: Fixed-rate loans maintain the same interest rate throughout the term, while variable rates can change based on market conditions.

Q4: Are there other loan payment methods?
A: Some loans use simple interest or declining balance methods, but this calculator uses the standard amortizing loan formula.

Q5: Does this include taxes and insurance?
A: No, this calculates only principal and interest payments. Actual payments may include additional costs like taxes or insurance.