1. What is the Loan Repayment Formula?

The loan repayment formula calculates the fixed monthly payment required to fully repay a loan over its term, including both principal and interest components.

2. How Does the Calculator Work?

The calculator uses the standard loan repayment formula:

Where:

• \( PMT \) — Monthly payment amount
• \( P \) — Principal loan amount (KES)
• \( r \) — Monthly interest rate (annual rate divided by 12)
• \( n \) — Total number of payments (loan term in months)

Explanation: The formula accounts for compound interest over the loan term, calculating a fixed payment that pays off both principal and interest over time.

3. Importance of Loan Calculation

Details: Understanding your monthly payment helps with budgeting and financial planning. It also allows you to compare different loan offers and terms.

4. Using the Calculator

Tips: Enter the principal amount in KES, annual interest rate (without % sign), and loan term in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is a typical interest rate in Kenya?
A: Rates vary but typically range from 12% to 18% for personal loans, depending on the lender and your creditworthiness.

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

Q3: Are there other loan costs not included?
A: This calculator doesn't include processing fees, insurance, or other charges that may apply to your loan.

Q4: What's the difference between fixed and variable rates?
A: Fixed rates remain constant, while variable rates can change. This calculator assumes a fixed interest rate.

Q5: Can I pay off my loan early?
A: Most lenders allow early repayment, but some may charge a prepayment penalty. Check your loan agreement.