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 fixed-rate mortgages and personal loans.

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 (term in years × 12)

Explanation: The formula accounts for compound interest and spreads payments equally over the loan term.

3. Importance of Loan Payment Calculation

Details: Accurate payment calculation helps borrowers understand their financial commitments, compare loan offers, and budget effectively.

4. Using the Calculator

Tips: Enter principal in GBP, annual interest rate as a percentage (e.g., 5.5 for 5.5%), and term in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Does this work for adjustable-rate mortgages?
A: No, this calculator is for fixed-rate loans only. Adjustable-rate mortgages require more complex calculations.

Q2: Are there any fees included in this calculation?
A: No, this calculates only principal and interest. Additional fees (arrangement fees, etc.) would increase total costs.

Q3: How accurate is this calculator?
A: It provides mathematically accurate results for fixed-rate loans, matching UK lending standards.

Q4: Can I use this for car loans?
A: Yes, this works for any fixed-rate installment loan including car loans, personal loans, and mortgages.

Q5: Why is my actual payment slightly different?
A: Lenders may use slightly different rounding methods or include insurance/products in the payment.