1. What is the Loan Payment Formula?

The loan payment formula calculates the fixed monthly payment required to pay off a loan over a specified term. This is the standard formula used by Westpac New Zealand and most other financial institutions.

2. How Does the Calculator Work?

The calculator uses the loan payment formula:

Where:

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

Explanation: The formula accounts for compound interest over the life of the loan, ensuring each payment covers both principal and interest.

3. Importance of Loan Calculation

Details: Understanding your monthly payments helps with budgeting and financial planning. It allows you to compare different loan options and terms.

4. Using the Calculator

Tips: Enter the principal amount in NZD, annual interest rate as a percentage, and loan term in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Does this include Westpac's fees?
A: No, this calculates only the principal and interest components. Additional fees may apply to actual Westpac loans.

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

Q3: How does loan term affect payments?
A: Shorter terms mean higher monthly payments but less total interest. Longer terms reduce monthly payments but increase total interest.

Q4: Can I make extra payments?
A: Westpac typically allows extra payments, which would reduce total interest and potentially shorten the loan term.

Q5: Are there prepayment penalties?
A: Check with Westpac as policies may vary. Some loans have fees for early repayment.