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Loan Installment Calculator Sri Lanka

Loan Installment Formula:

\[ PMT = P \times \frac{r(1 + r)^n}{(1 + r)^n - 1} \]

LKR
decimal
months

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1. What is the Loan Installment Calculation?

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.

2. How Does the Calculator Work?

The calculator uses the standard loan payment formula:

\[ PMT = P \times \frac{r(1 + r)^n}{(1 + r)^n - 1} \]

Where:

Explanation: The formula accounts for compound interest over the loan term, calculating a fixed payment that completely amortizes the loan.

3. Importance of Loan Calculation

Details: Accurate loan calculation helps borrowers understand their repayment obligations, compare different loan offers, and plan their finances accordingly in the Sri Lankan context.

4. Using the Calculator

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.

5. Frequently Asked Questions (FAQ)

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.

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