Money Saving Expert Loan Repayment Calculator

Loan Repayment Formula:

\[ PMT = P \times \frac{r}{12} \times \frac{(1 + \frac{r}{12})^{12 \times t}}{(1 + \frac{r}{12})^{12 \times t} - 1} \]

Monthly Repayment (PMT):

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1. What is the Loan Repayment Calculator?

The Money Saving Expert Loan Repayment Calculator helps you determine your monthly loan payments based on the principal amount, annual interest rate, and loan term. It uses the standard amortization formula to calculate accurate monthly repayment amounts.

2. How Does the Calculator Work?

The calculator uses the loan repayment formula:

\[ PMT = P \times \frac{r}{12} \times \frac{(1 + \frac{r}{12})^{12 \times t}}{(1 + \frac{r}{12})^{12 \times t} - 1} \]

Where:

\( PMT \) — Monthly repayment amount (GBP)
\( P \) — Loan principal amount (GBP)
\( r \) — Annual interest rate (decimal)
\( t \) — Loan term in years

Explanation: This formula calculates the fixed monthly payment required to fully repay a loan over the specified term, including both principal and interest components.

3. Importance of Loan Repayment Calculation

Details: Accurate loan repayment calculation is essential for financial planning, budgeting, and comparing different loan options. It helps borrowers understand their monthly obligations and make informed borrowing decisions.

4. Using the Calculator

Tips: Enter the loan principal in GBP, annual interest rate as a percentage, and loan term in years. All values must be positive numbers with the principal and interest rate greater than zero.

5. Frequently Asked Questions (FAQ)

Q1: What is the difference between interest rate and APR?
A: The interest rate is the cost of borrowing the principal, while APR (Annual Percentage Rate) includes both the interest rate and any additional fees, providing a more comprehensive cost comparison.

Q2: Can I use this calculator for mortgage calculations?
A: Yes, this formula works for any fixed-rate amortizing loan, including mortgages, personal loans, and car loans.

Q3: How does loan term affect monthly payments?
A: Longer loan terms result in lower monthly payments but higher total interest paid over the life of the loan. Shorter terms have higher monthly payments but lower total interest costs.

Q4: What if I make additional payments?
A: Additional payments reduce the principal balance faster, which can shorten the loan term and reduce total interest paid. This calculator shows the standard payment without extra contributions.

Q5: Are there any loans this calculator doesn't work for?
A: This calculator is designed for fixed-rate amortizing loans. It may not be accurate for interest-only loans, variable-rate loans, or loans with balloon payments.