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. It's used by Commonwealth Bank and other financial institutions to determine loan repayment amounts.

2. How Does the Calculator Work?

The calculator uses the standard loan payment formula:

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, ensuring each payment covers both principal and interest.

3. Importance of Loan Payment Calculation

Details: Understanding your monthly payment helps with budgeting and ensures you can comfortably afford the loan. It also shows the total cost of borrowing.

4. Using the Calculator

Tips: Enter the loan amount in AUD, annual interest rate (Commonwealth Bank's current rates), and loan term in years. The calculator will show your monthly payment and total loan cost.

5. Frequently Asked Questions (FAQ)

Q1: What are Commonwealth Bank's current personal loan rates?
A: Rates vary (typically 6.99%-19.99% p.a.) based on credit score, loan amount, and term. Check their website for current offers.

Q2: Does this include loan fees?
A: No, this calculates principal and interest only. Commonwealth Bank may charge additional fees (e.g., establishment fees).

Q3: Can I make extra repayments?
A: Commonwealth Bank personal loans typically allow extra repayments without penalty, which would reduce total interest.

Q4: How does loan term affect payments?
A: Shorter terms mean higher monthly payments but less total interest. Longer terms reduce monthly payments but increase total cost.

Q5: Is this calculation accurate for all loan types?
A: This works for fixed-rate, amortizing loans. It doesn't apply to interest-only loans or lines of credit.