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. It considers the principal amount, interest rate, and loan duration to determine the periodic payment amount.

2. How Does the Calculator Work?

The calculator uses the personal loan payment formula:

Where:

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

Explanation: The formula accounts for compound interest over the loan term, distributing payments evenly while accounting for interest accrual.

3. Importance of Loan Comparison

Details: Comparing loan options helps borrowers find the most cost-effective solution. Small differences in interest rates can significantly impact total repayment amounts over time.

4. Using the Calculator

Tips: Enter the loan amount in USD, annual interest rate as a percentage, and loan term in months. The calculator will show monthly payment, total repayment, and total interest costs.

5. Frequently Asked Questions (FAQ)

Q1: Should I choose a shorter or longer loan term?
A: Shorter terms mean higher monthly payments but less total interest. Longer terms reduce monthly payments but increase total interest costs.

Q2: How does interest rate affect my payments?
A: Higher rates increase both monthly payments and total interest. Even a 1% difference can significantly impact total costs.

Q3: Are there other loan costs not included here?
A: This calculator doesn't account for origination fees, prepayment penalties, or other potential loan charges.

Q4: What's better - fixed or variable rates?
A: Fixed rates provide predictable payments, while variable rates may start lower but can increase over time.

Q5: How can I reduce my total interest paid?
A: Consider making extra payments when possible, choosing shorter terms, or negotiating lower interest rates.