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 both principal and interest. It's the standard formula used by Westpac and other financial institutions for fixed-rate loans.

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 (term in years × 12)
• \( PMT \) — Monthly payment amount (AUD)

Explanation: The formula accounts for compound interest over the life of the loan, calculating a fixed payment that will completely pay off the loan by the end of the term.

3. Importance of Loan Payment Calculation

Details: Accurate payment calculation helps borrowers understand their financial commitments, compare loan options, and budget effectively for their Westpac loan.

4. Using the Calculator

Tips: Enter the principal amount in AUD, annual interest rate as a percentage (e.g., 5.25 for 5.25%), and loan term in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Does this include Westpac's fees and charges?
A: No, this calculation only includes principal and interest. Additional fees may apply to your Westpac loan.

Q2: What's the difference between fixed and variable rate loans?
A: Fixed-rate loans maintain the same interest rate for a set period, while variable rates can change. This calculator assumes a fixed rate.

Q3: How does making extra payments affect my loan?
A: Extra payments reduce the principal faster, potentially saving interest and shortening the loan term.

Q4: What is loan amortization?
A: Amortization is the process of gradually paying off your loan through regular payments that cover both principal and interest.

Q5: Can I get pre-approved for a Westpac loan?
A: Yes, Westpac offers pre-approval which gives you an indication of how much you could borrow before you find a property.