1. What is the Loan Payment Formula?

The loan payment formula calculates the fixed monthly payment required to fully repay a loan over its term, including both principal and interest. This is the standard formula used by banks and financial institutions in Malaysia.

2. How Does the Calculator Work?

The calculator uses the loan payment formula:

Where:

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

Explanation: The formula accounts for compound interest over the loan term, calculating the fixed payment that will pay off both principal and interest by the end of the term.

3. Importance of Loan Calculation

Details: Understanding your monthly payment helps with financial planning, comparing loan offers, and determining affordability before committing to a loan.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

Q1: Does this include other loan fees?
A: No, this calculates only principal and interest. Additional fees like processing fees or insurance may apply to actual loans.

Q2: What is a typical interest rate in Malaysia?
A: As of 2023, rates typically range from 3-6% for housing loans and 5-9% for personal loans, depending on credit score and loan type.

Q3: How can I reduce my total interest paid?
A: You can reduce total interest by choosing a shorter loan term or making additional principal payments when possible.

Q4: Does this work for Islamic financing?
A: Islamic financing uses different profit rate calculations, but this can give you a rough estimate for comparison.

Q5: Why does my bank's calculation differ slightly?
A: Banks may use daily rest interest calculation or different rounding methods, resulting in small differences.