Personal Loan Calculator

The Personal Loan Calculator is a tool designed to help individuals determine the potential monthly payment, interest rate, or total repayment amount for a loan based on specific parameters such as loan amount, interest rate, and loan term.

What is the purpose of the Personal Loan Calculator?

The “Personal Loan Calculator” helps borrowers assess their monthly payments, total loan cost, and loan term options based on the amount they wish to borrow, interest rate, and repayment period.

Personal Loan Calculator formula

The formula for calculating the monthly payment on a personal loan is:

Monthly Payment = Loan Amount × (Interest Rate / 12) / (1 - (1 + Interest Rate / 12) ^ -Number of Payments)

Where:

• Loan Amount is the principal loan amount.
• Interest Rate is the annual interest rate expressed as a decimal (e.g., 6% = 0.06).
• Number of Payments is the total number of payments, usually the loan term in months.

This formula helps determine how much a borrower will need to pay each month to repay their personal loan.

Personal Loan Calculator example

Here are two examples to demonstrate how the “Personal Loan Calculator” works:

Example 1: Loan for $5,000 with 6% annual interest for 3 years

1. Personal details:
   • Loan Amount: $5,000
   • Interest Rate: 6% per year (0.06)
   • Loan Term: 36 months
2. Calculation:
   Using the formula:
   Monthly Payment = 5000 × (0.06 / 12) / (1 - (1 + 0.06 / 12) ^ -36)
Monthly Payment ≈ $154.05

Thus, the monthly payment for the loan will be approximately $154.05.

Example 2: Loan for $10,000 with 8% annual interest for 5 years

1. Personal details:
   • Loan Amount: $10,000
   • Interest Rate: 8% per year (0.08)
   • Loan Term: 60 months
2. Calculation:
   Using the formula:
   Monthly Payment = 10000 × (0.08 / 12) / (1 - (1 + 0.08 / 12) ^ -60)
Monthly Payment ≈ $202.76

Thus, the monthly payment for the loan will be approximately $202.76.

The Personal Loan Calculator is a valuable tool that helps borrowers understand their financial obligations when taking out a loan, providing them with clear insights into monthly payments, interest rates, and loan costs.