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 components. This is the standard formula used by banks in the UAE for installment loans.

2. How Does the Calculator Work?

The calculator uses the loan payment formula:

Where:

• \( PMT \) — Monthly payment amount
• \( P \) — Principal loan amount (AED)
• \( r \) — Monthly interest rate (decimal)
• \( n \) — Number of monthly payments

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 payment calculation helps borrowers understand their financial commitments, compare loan offers, and plan their budgets effectively.

4. Using the Calculator

Tips: Enter the loan amount in AED, monthly interest rate in decimal form (e.g., 0.005 for 0.5%), and loan term in months. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How do I convert annual rate to monthly rate?
A: Divide the annual percentage rate by 12 (months) and by 100 to convert to decimal. For example, 6% annual = 0.06/12 = 0.005 monthly.

Q2: Are UAE loan calculations different from other countries?
A: The formula is universal, but UAE banks may use different compounding methods or add fees that affect the total cost.

Q3: Does this include insurance or other fees?
A: No, this calculates only the principal and interest portion. UAE loans often require additional insurance payments.

Q4: What's typical loan term in UAE?
A: Personal loans typically range 12-60 months, while mortgages can extend to 25 years (300 months).

Q5: How accurate is this calculator?
A: It provides the mathematical calculation, but actual bank payments may vary slightly due to rounding or specific bank policies.