1. What is the Personal Loan Payment Formula?

The personal loan payment formula calculates the fixed monthly payment required to repay a loan over a specified term. This is the same formula used by Martin Lewis's MoneySavingExpert tools for loan calculations.

2. How Does the Calculator Work?

The calculator uses the standard loan payment formula:

Where:

• \( PMT \) — Monthly payment (GBP)
• \( P \) — Principal loan amount (GBP)
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Number of monthly payments

Explanation: The formula accounts for compound interest over the life of the loan to determine the fixed payment amount that will pay off the loan in full by the end of the term.

3. Importance of Loan Payment Calculation

Details: Understanding your monthly payment helps with budgeting and comparing different loan offers. It shows the true cost of borrowing when interest is factored in.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

Q1: Does this include any fees?
A: No, this calculates only the principal and interest payments. Any loan fees would need to be added separately.

Q2: What's a typical loan term?
A: Personal loans typically range from 12 to 84 months (1-7 years), with 36-60 months being most common.

Q3: How does interest rate affect payments?
A: Higher rates significantly increase total repayment costs. A 1% difference can add hundreds to total interest.

Q4: Can I pay off early?
A: Most UK loans allow early repayment, though some may charge an early settlement fee (typically 1-2 months' interest).

Q5: How accurate is this calculator?
A: This provides standard loan payment calculations. Actual loan offers may vary slightly based on lender-specific rounding methods.