Loan Installment Formula:
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The loan installment calculation determines the fixed monthly payment required to repay a loan over a specified period, including both principal and interest components. This is essential for financial planning in Sri Lanka.
The calculator uses the standard loan payment formula:
Where:
Explanation: The formula accounts for compound interest over the loan term, calculating a fixed payment that completely amortizes the loan.
Details: Accurate loan calculation helps borrowers understand their repayment obligations, compare different loan offers, and plan their finances accordingly in the Sri Lankan context.
Tips: Enter loan amount in LKR, monthly interest rate as a decimal (e.g., 0.01 for 1%), and number of monthly payments. All values must be positive.
Q1: How do I convert annual rate to monthly?
A: Divide the annual percentage rate by 12 (months) and by 100 (to convert to decimal). For example, 12% annual = 0.12/12 = 0.01 monthly.
Q2: Are Sri Lankan loan rates typically flat or reducing?
A: Most modern loans in Sri Lanka use reducing balance interest, which this calculator assumes.
Q3: What additional costs should I consider?
A: Factor in processing fees, insurance, and other bank charges which aren't included in this calculation.
Q4: How does loan tenure affect payments?
A: Longer tenures reduce monthly payments but increase total interest paid over the loan life.
Q5: Can I use this for other currencies?
A: Yes, the calculation works for any currency as long as all amounts are in the same currency.