Repayment Calculator Money Saving Expert

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 Repayment Calculator?

The Repayment Calculator estimates your monthly loan repayments based on the principal amount, annual interest rate, and loan term. It helps you plan your finances and understand the cost of borrowing.

2. How Does the Calculator Work?

The calculator uses the standard 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)
\( P \) — Principal loan 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.

3. Importance of Repayment Calculation

Details: Understanding your monthly repayment amount is crucial for budgeting, financial planning, and comparing different loan options. It helps you determine affordability and avoid over-borrowing.

4. Using the Calculator

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

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 calculator works for any type of fixed-rate loan, including mortgages, personal loans, and car loans.

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

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

Q5: Are there any fees not included in this calculation?
A: This calculation only includes principal and interest. It does not account for any additional fees, insurance, or other charges that may be associated with your loan.