1. What is the Personal Loan Payment Formula?

The personal loan payment formula calculates the fixed monthly payment required to repay a loan over 3 years (36 months) with a fixed interest rate. It accounts for both principal and interest payments.

2. How Does the Calculator Work?

The calculator uses the loan payment formula:

Where:

• \( Principal \) — Original loan amount
• \( r \) — Monthly interest rate (APR/12)
• \( 36 \) — Number of months (3 years)

Explanation: The formula calculates the fixed payment that pays off the loan in exactly 36 months, with each payment covering both interest and principal.

3. Importance of Loan Payment Calculation

Details: Understanding your monthly payment 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 (principal) and annual percentage rate (APR). The calculator will show your monthly payment, total repayment amount, and total interest paid over 3 years.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between APR and interest rate?
A: APR includes both the interest rate and any loan fees, giving a more complete picture of the loan's cost.

Q2: Can I pay off the loan early?
A: Most lenders allow early repayment, but some may charge prepayment penalties. Check your loan terms.

Q3: Why is my payment the same each month?
A: This calculator assumes an amortizing loan where each payment includes both principal and interest, with the interest portion decreasing over time.

Q4: What if I want a different loan term?
A: This calculator is specifically for 3-year (36-month) loans. Different terms would require adjusting the months in the formula.

Q5: Does this include taxes or insurance?
A: No, this calculates only the principal and interest payments. Personal loans typically don't include escrow items like mortgages do.