1. What is the Personal Loan Payment Formula?

The personal loan payment formula calculates your monthly payment for a fixed-term loan (18 months in this case) including any extra payments you choose to make. This helps you understand the true cost of borrowing and the impact of additional 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)
• \( n \) — Number of months (18)
• \( Extra Payment \) — Additional amount paid each month

Explanation: The formula calculates the base monthly payment needed to pay off the loan in 18 months, then adds your extra payment to show the adjusted monthly amount.

3. Importance of Extra Payments

Details: Making extra payments reduces the total interest paid and can shorten your loan term. Even small additional amounts can lead to significant savings over time.

4. Using the Calculator

Tips: Enter the loan amount, APR (annual percentage rate), and any extra amount you plan to pay monthly. The calculator will show your adjusted payment and total loan cost.

5. Frequently Asked Questions (FAQ)

Q1: Why use an 18-month term specifically?
A: 18-month personal loans are common for debt consolidation or medium-term financing. The calculator can be adapted for other terms if needed.

Q2: How do extra payments affect my loan?
A: Extra payments reduce principal faster, decreasing total interest paid. They may also shorten your loan term if applied consistently.

Q3: Should I prioritize extra payments or higher interest debt?
A: Generally, pay off higher-interest debt first (credit cards), but consult a financial advisor for your specific situation.

Q4: Are there prepayment penalties?
A: Some loans have prepayment penalties. Check your loan agreement before making extra payments.

Q5: Can I change my extra payment amount later?
A: Typically yes, unless your loan has specific restrictions. Contact your lender for details.