1. What is the Loan Payment Formula?

The loan payment formula calculates the fixed monthly payment required to fully amortize a loan over its term. This is the standard formula used in the UK for calculating mortgage and loan payments.

2. How Does the Calculator Work?

The calculator uses the loan payment formula:

Where:

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

Explanation: The formula accounts for both principal repayment and interest charges, spreading payments evenly over the loan term.

3. Importance of Loan Calculation

Details: Understanding your monthly payment helps with budgeting and financial planning. It also shows the true cost of borrowing through total interest calculations.

4. Using the Calculator

Tips: Enter the principal amount in GBP, annual interest rate as a percentage (e.g., 4.5 for 4.5%), and loan term in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Does this include UK mortgage fees?
A: No, this calculates only the principal and interest payments. Additional fees like arrangement fees would need to be added separately.

Q2: How does repayment term affect payments?
A: Longer terms reduce monthly payments but increase total interest paid. Shorter terms have higher payments but lower total interest.

Q3: Is this calculator accurate for UK mortgages?
A: Yes, this uses the standard UK amortization formula. However, actual offers may vary slightly based on lender-specific calculations.

Q4: What's the difference between interest rate and APR?
A: APR includes fees and other costs of credit. This calculator uses the base interest rate for principal and interest calculations.

Q5: Can I calculate part-month interest?
A: This calculator assumes standard monthly payments. For daily interest calculations (common in UK mortgages), more complex formulas are needed.