Money Smart Personal Loan Calculator

Personal Loan Payment Formula:

\[ PMT = P \times \frac{r \times (1 + r)^n}{(1 + r)^n - 1} \]

Monthly Payment (PMT):

Total Payment:

Total Interest:

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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, including interest. This is the standard formula used by most lenders for fixed-rate personal loans.

2. How Does the Calculator Work?

The calculator uses the personal loan payment formula:

\[ PMT = P \times \frac{r \times (1 + r)^n}{(1 + r)^n - 1} \]

Where:

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

Explanation: The formula accounts for compound interest over the life of the loan, calculating a fixed payment that covers both principal and interest each month.

3. Importance of Loan Payment Calculation

Details: Understanding your monthly payment helps with budgeting and ensures the loan is affordable. It also helps compare different loan offers to find the most cost-effective option.

4. Using the Calculator

Tips: Enter the loan amount in AUD, annual interest rate as a percentage (e.g., 7.5 for 7.5%), and loan term in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Does this calculator account for loan fees?
A: No, this calculates the base payment without considering any origination fees or other charges that may be added to your loan.

Q2: What's the difference between interest rate and APR?
A: APR includes fees and other loan costs, while the interest rate is just the cost of borrowing the principal. This calculator uses the interest rate.

Q3: How can I reduce my total interest paid?
A: You can reduce total interest by choosing a shorter loan term, making extra payments, or securing a lower interest rate.

Q4: Are variable rate loans calculated differently?
A: Yes, variable rate loans can change over time. This calculator assumes a fixed interest rate for the entire loan term.

Q5: How accurate is this calculator?
A: This provides a close estimate, but actual loan terms may vary slightly based on the lender's specific calculation methods and rounding rules.