1. What is the Loan Payoff Calculation?

The loan payoff calculation determines how long it will take to fully repay a personal loan based on your monthly payment amount, principal, and interest rate. This helps borrowers understand their repayment timeline.

2. How Does the Calculator Work?

The calculator uses the loan payoff formula:

Where:

• \( n \) — Number of months to payoff
• \( PMT \) — Monthly payment amount (GBP)
• \( P \) — Principal loan amount (GBP)
• \( r \) — Monthly interest rate (annual rate ÷ 12)

Explanation: The formula calculates the time needed to repay a loan by considering the relationship between payment amount, principal, and interest.

3. Importance of Loan Payoff Calculation

Details: Knowing your payoff time helps with financial planning, comparing loan options, and understanding the true cost of borrowing.

4. Using the Calculator

Tips: Enter your monthly payment in GBP, principal loan amount in GBP, and annual interest rate as a percentage. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why is my payoff time longer than expected?
A: This typically happens when your monthly payment is close to the interest-only amount, meaning you're paying mostly interest rather than principal.

Q2: How can I reduce my payoff time?
A: Making larger monthly payments or making additional payments will reduce your payoff time and total interest paid.

Q3: Does this calculator account for payment holidays?
A: No, this assumes regular monthly payments without any breaks. Payment holidays would extend your payoff time.

Q4: Is this calculation accurate for all UK loans?
A: This works for standard personal loans with fixed monthly payments. It may not apply to credit cards or variable rate loans.

Q5: What if my calculation shows an error?
A: Check that your monthly payment exceeds the monthly interest (PMT > P×r). If not, you'll never pay off the loan.