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 MoneySmart.gov.au and most financial institutions.

2. How Does the Calculator Work?

The calculator uses the loan payment formula:

Where:

• \( P \) — Principal loan amount (AUD)
• \( r \) — Monthly interest rate (annual rate divided by 12)
• \( n \) — Total number of payments (loan 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.

3. Importance of Loan Payment Calculation

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

4. Using the Calculator

Tips: Enter the loan amount in AUD, the annual interest rate as a percentage, and the loan term in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Is this calculator specific to Australia?
A: Yes, this follows MoneySmart.gov.au's guidelines for personal loan calculations in Australian dollars.

Q2: Does this include loan fees?
A: No, this calculates principal and interest only. Additional fees may apply to actual loans.

Q3: What's a typical interest rate for personal loans?
A: As of 2023, rates typically range from 6% to 20% depending on credit score and lender.

Q4: How can I reduce my total interest paid?
A: Choose a shorter loan term or make additional repayments when possible.

Q5: Are the results accurate for variable rate loans?
A: This assumes a fixed interest rate. Variable rates would change the payment amounts over time.