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 POSB Bank and other financial institutions in Singapore for personal loans.

2. How Does the Calculator Work?

The calculator uses the loan payment formula:

Where:

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

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 Calculation

Details: Understanding your monthly payment helps with budgeting and ensures the loan is affordable. It also allows comparison between different loan offers.

4. Using the Calculator

Tips: Enter the loan amount in SGD, annual interest rate (POSB's current rate), and loan term in months. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is POSB's typical interest rate for personal loans?
A: POSB personal loan interest rates typically range from 3.5% to 10% per annum, depending on creditworthiness and loan amount.

Q2: Are there any fees not included in this calculation?
A: Yes, POSB may charge processing fees (typically 1-3% of loan amount) and late payment fees which aren't reflected in the monthly payment.

Q3: What is the maximum loan term available?
A: POSB usually offers personal loan terms from 1 to 5 years (12 to 60 months).

Q4: Can I pay off my loan early?
A: Yes, but there may be early repayment fees. Check with POSB for current terms.

Q5: How does this compare to credit card interest?
A: Personal loans typically have much lower interest rates (3.5-10%) compared to credit cards (24-28% per annum).