1. What is the Payday Loan Payment Formula?

The payday loan payment formula calculates the fixed monthly payment required to repay a short-term loan in UAE, which typically carries high interest rates. This formula accounts for both principal and interest payments over the loan term.

2. How Does the Calculator Work?

The calculator uses the standard loan payment formula:

Where:

• \( P \) — Principal loan amount (AED)
• \( r \) — Monthly interest rate (decimal)
• \( n \) — Number of months
• \( PMT \) — Monthly payment amount (AED)

Explanation: The formula calculates the fixed payment that covers both interest and principal each month, ensuring the loan is paid off in full by the end of the term.

3. Importance of Payment Calculation

Details: Understanding your exact payment amount is crucial when taking payday loans in UAE due to their typically high interest rates. This helps borrowers assess affordability and avoid financial distress.

4. Using the Calculator

Tips: Enter the principal amount in AED, monthly interest rate as a decimal (e.g., 5% = 0.05), and loan term in months. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What are typical interest rates for payday loans in UAE?
A: Rates vary but are often high, ranging from 1% to 5% per month or more, depending on the lender and borrower's creditworthiness.

Q2: Are there any fees not included in this calculation?
A: Some lenders may charge processing fees or late payment penalties that aren't reflected in this basic calculation.

Q3: How can I convert APR to monthly rate?
A: Divide the annual percentage rate (APR) by 12. For example, 60% APR = 5% monthly rate (0.05 decimal).

Q4: What happens if I miss a payment?
A: Most lenders impose heavy penalties for missed payments, which can quickly increase your total debt.

Q5: Are payday loans regulated in UAE?
A: Yes, but regulations vary. Borrowers should verify lender credentials with the UAE Central Bank.