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. This is the standard formula used by CommBank and other financial institutions for personal loans and mortgages.

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 ÷ 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, ensuring each payment covers both principal and interest.

3. Importance of Loan Calculation

Details: Understanding your monthly payment helps with budgeting and comparing loan options. It also shows the total cost of borrowing, including interest.

4. Using the Calculator

Tips: Enter the loan amount in AUD, annual interest rate as a percentage (e.g., 5.5 for 5.5%), and loan term in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How does CommBank calculate personal loan repayments?
A: CommBank uses this standard formula to calculate fixed monthly repayments based on your loan amount, interest rate, and term.

Q2: What's the difference between personal loans and mortgages?
A: Mortgages typically have longer terms (25-30 years) and lower rates, while personal loans have shorter terms (1-7 years) and higher rates.

Q3: Can I change my loan term after approval?
A: Some lenders allow term adjustments, which would change your monthly payment. Check with CommBank for specific options.

Q4: Are there fees not included in this calculation?
A: Yes, this doesn't account for establishment fees, monthly service fees, or early repayment fees that may apply.

Q5: How can I reduce my total interest paid?
A: Choose a shorter term or make extra repayments (if your loan allows) to reduce total interest costs.