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 calculation used by UK lenders for personal loans.

2. How Does the Calculator Work?

The calculator uses the loan payment formula:

Where:

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

Explanation: The formula accounts for compound interest over the loan term, calculating a fixed payment that covers both principal and interest each month.

3. Importance of Loan Payment Calculation

Details: Understanding your monthly payment helps with budgeting and comparing loan offers. It shows the true cost of borrowing and helps avoid overcommitment.

4. Using the Calculator

Tips: Enter the loan amount in GBP, annual interest rate (APR) as a percentage, and loan term in months. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between APR and interest rate?
A: APR (Annual Percentage Rate) includes both the interest rate and any fees, giving a more complete picture of the loan's cost.

Q2: Are UK personal loans always calculated this way?
A: Most fixed-rate personal loans use this calculation, but some may have different fee structures or payment schedules.

Q3: What affects my personal loan interest rate?
A: Rates depend on your credit score, income, loan amount, term, and the lender's policies.

Q4: Can I pay off my loan early?
A: Most UK lenders allow early repayment but may charge an early repayment fee, typically 1-2 months' interest.

Q5: How accurate is this calculator?
A: It provides an estimate based on the inputs. Actual loan offers may include additional fees or different terms.