1. What is the Loan Repayment Formula?

The loan repayment formula calculates the fixed monthly payment required to fully repay a £5,000 loan over a specified term, including interest. It's based on the amortization formula used by UK lenders.

2. How Does the Calculator Work?

The calculator uses the standard amortization formula:

Where:

• \( P \) — Principal amount (£5000)
• \( r \) — Monthly interest rate (annual rate ÷ 12 ÷ 100)
• \( n \) — Number of monthly payments
• \( PMT \) — Monthly payment amount

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

3. Importance of Loan Calculation

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

4. Using the Calculator

Tips: Enter the annual interest rate (APR) as a percentage and the loan term in months. Typical UK personal loans range from 1-7 years (12-84 months).

5. Frequently Asked Questions (FAQ)

Q1: What's a typical interest rate for £5000 loans in the UK?
A: Rates vary (3%-40% APR) depending on credit score, term length, and lender. Good credit typically gets 3-10%.

Q2: Are there fees not included in this calculation?
A: Some UK lenders charge arrangement fees (1-5% of loan amount) which would increase total cost.

Q3: Can I pay off the loan early?
A: Most UK lenders allow early repayment but may charge up to 1-2 months' interest as an early settlement fee.

Q4: How does loan term affect total interest?
A: Longer terms reduce monthly payments but increase total interest paid. Shorter terms cost less overall but have higher monthly payments.

Q5: Is this calculator accurate for all UK loans?
A: It works for standard fixed-rate personal loans. Credit cards, overdrafts, or variable-rate loans use different calculations.