1. What is the Loan Payment Formula?

The loan payment formula calculates the fixed monthly payment required to repay a loan over a specified term, including interest. It's used by Tesco Bank and other lenders for personal loans in the UK.

2. How Does the Calculator Work?

The calculator uses the standard loan payment formula:

Where:

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

Explanation: The formula accounts for compound interest over the loan term, calculating a fixed payment that pays off both principal and interest over time.

3. Importance of Loan Calculation

Details: Understanding your monthly payments helps with budgeting and comparing loan offers. It shows the true cost of borrowing when interest is included.

4. Using the Calculator

Tips: Enter the loan amount in GBP, annual interest rate (APR), and loan term in months. Tesco Bank typically offers personal loans from £1,000 to £25,000 with terms from 1 to 10 years.

5. Frequently Asked Questions (FAQ)

Q1: What is APR?
A: APR (Annual Percentage Rate) includes both interest and any fees, showing the true annual cost of borrowing.

Q2: Are Tesco Bank loan rates fixed?
A: Yes, Tesco Bank personal loans typically have fixed interest rates for the loan term.

Q3: How does loan term affect payments?
A: Longer terms reduce monthly payments but increase total interest paid. Shorter terms have higher payments but lower total cost.

Q4: What credit score is needed?
A: Tesco Bank generally requires good to excellent credit for their best rates.

Q5: Are there early repayment charges?
A: Tesco Bank allows early repayment but may charge up to 58 days' interest.