Overview
Loan repayments depend on the amount borrowed, interest rate, loan term, repayment frequency, fees and the lender’s calculation method.
Objective
Estimate regular principal-and-interest repayments for a standard amortising loan.
What You Need
- Loan principal
- Interest rate
- Loan term
- Repayment frequency
- Calculator or loan calculator
Before You Start
Confirm whether the quoted rate is nominal or effective and whether fees are excluded. For an estimate, use a standard amortising-loan formula or calculator with matching payment periods.
How to Calculate
- Convert the interest rate to the rate per repayment period.
- Find the total number of repayments.
- Use the amortising payment formula or a loan calculator.
- Check the result against the lender’s quoted repayment and fees.
Worked Example
For a loan, changing the term while keeping the same amount and rate generally changes both the regular repayment and total interest: a longer term usually lowers each repayment but increases total interest.
Useful Tips
- Match the repayment frequency and interest-rate period.
- Compare total repayment cost as well as the regular payment.
- Include fees separately when they are not part of the calculator input.
Common Mistakes
- Using simple interest for an amortising loan.
- Comparing repayments without comparing loan terms.
- Ignoring fees or rate changes.
- Treating an estimate as a lender quote.
Important Notes
Interest-only, variable-rate, balloon-payment and fee-bearing loans require different assumptions. Actual lender calculations may also use daily interest.
FAQ
Why can two loan calculators give slightly different results?
They may use different compounding, rounding, fee or payment-date assumptions.
Does a lower repayment always mean a cheaper loan?
No. A longer term can lower repayments while increasing total interest paid.